KEYTAKEAWAYS
- Powell’s criminal investigation has increased Federal Reserve policy uncertainty, reinforcing concerns over politicization and weakening confidence in traditional monetary governance structures.
- Rate-cut expectations for 2026 have dropped sharply to 51 basis points, yet Bitcoin has shown resilience as equities declined.
- Bitcoin’s stable price action amid macro turmoil strengthens its narrative as a hedge against fiat policy risk and institutional instability.
- KEY TAKEAWAYS
- BACKGROUND OF THE POWELL CRIMINAL INVESTIGATION AND FEDERAL RESERVE INDEPENDENCE
- POLITICAL PRESSURE, TRUMP, AND THE FEDERAL RESERVE LEADERSHIP TRANSITION
- FEDERAL RESERVE RATE CUT EXPECTATIONS AND POLICY UNCERTAINTY IN 2026
- BITCOIN PRICE REACTION AND DECOUPLING FROM TRADITIONAL RISK ASSETS
- BITCOIN TECHNICAL ANALYSIS AND DERIVATIVES MARKET SIGNALS
- CRYPTO MARKET SENTIMENT, FED POLITICIZATION, AND BITCOIN NARRATIVES
- CONCLUSION: POWELL INVESTIGATION, FED POLICY RISK, AND BITCOIN’S STRATEGIC ROLE
- DISCLAIMER
- WRITER’S INTRO
CONTENT
Powell’s criminal investigation reshapes Federal Reserve policy risk as rate-cut expectations fall. Bitcoin shows signs of decoupling as a hedge against political uncertainty.
On January 9, 2026, the U.S. Department of Justice launched a criminal investigation into Federal Reserve Chair Jerome Powell, an action Powell described as politically motivated pressure. As rate-cut expectations cooled sharply—markets now pricing only 51 basis points of easing in 2026—Bitcoin showed early signs of decoupling from traditional risk assets. While U.S. equity futures declined 0.4–0.7%, Bitcoin remained stable and even gained 0.7%. Many analysts argue that growing concerns over Federal Reserve politicization are strengthening Bitcoin’s role as a hedge against inflation and fiat policy risk.
BACKGROUND OF THE POWELL CRIMINAL INVESTIGATION AND FEDERAL RESERVE INDEPENDENCE
The criminal investigation into Jerome Powell represents one of the most extraordinary developments in modern U.S. monetary history. According to the disclosed timeline, the probe was approved in November 2025 by U.S. prosecutor Jeanine Pirro, with a grand jury subpoena formally issued to the Federal Reserve on January 9, 2026. Two days later, on January 11, Powell released a video statement via the Federal Reserve’s official website, characterizing the investigation as an unprecedented attempt to exert political pressure on monetary policy rather than a legitimate inquiry into misconduct.
The investigation centers on Powell’s June 2025 congressional testimony regarding a $2.5 billion Federal Reserve headquarters renovation project. The project, initiated in 2022 and scheduled for completion in 2027, has exceeded its original budget by approximately $700 million. The Department of Justice stated that its priority is examining potential misuse of taxpayer funds and the accuracy of Powell’s testimony before Congress. Powell has strongly rejected this framing, arguing that the renovation issue is being leveraged as a political instrument to undermine Federal Reserve independence.
POLITICAL PRESSURE, TRUMP, AND THE FEDERAL RESERVE LEADERSHIP TRANSITION
The Powell investigation cannot be separated from the broader political context surrounding U.S. monetary policy. Tensions between Powell and Donald Trump have persisted for years, particularly over disagreements regarding the timing and scale of interest rate cuts. Powell’s term as Federal Reserve Chair is set to expire in May 2026, and Trump has indicated plans to announce a successor in the near future.
Compounding uncertainty, Senator Thom Tillis has publicly opposed confirming any new Federal Reserve nominee until the investigation is resolved, raising concerns about judicial overreach and the erosion of institutional independence. As a result, investors are increasingly forced to account not only for macroeconomic data, but also for the growing risk that monetary policy decisions may be shaped by political dynamics rather than economic fundamentals.
FEDERAL RESERVE RATE CUT EXPECTATIONS AND POLICY UNCERTAINTY IN 2026
Market expectations for Federal Reserve rate cuts in 2026 have shifted dramatically. As of January 12, 2026, CME FedWatch data shows a 95% probability that rates will remain unchanged at the January 28 FOMC meeting, with only a 5% chance of a 25 basis point cut. For March, the probability of no change stands at 71.3%, while the likelihood of a cut has declined to 27.6%, down sharply from over 50% one week earlier.
June 2026 is now widely viewed as the earliest plausible timing for the first rate cut, with markets assigning a 73% probability to a 25 basis point reduction. In total, expectations for 2026 have been revised down to just 51 basis points of easing, compared with earlier projections of 70–80 basis points before the release of stronger-than-expected December employment data on January 9.
Although the Powell investigation did not trigger an immediate repricing of rate-cut probabilities, it has materially increased perceived policy uncertainty. Powell has explicitly linked the probe to threats against Federal Reserve independence, and the uptick in the VIX on January 12 reflects a rising demand for protection against macro and institutional risk.
BITCOIN PRICE REACTION AND DECOUPLING FROM TRADITIONAL RISK ASSETS
Bitcoin’s price behavior during this period has attracted significant attention. From January 1 to January 6, Bitcoin rallied from $87,520 to a weekly high of $93,927, representing a 7.3% gain. Following Powell’s January 11 statement, Bitcoin retraced to $90,442, a 3.7% decline from the local high. However, as news of the investigation spread more broadly, Bitcoin stabilized and rose to $91,884 by 02:00 UTC on January 12, posting a 0.7% gain over 24 hours.
This resilience stood in stark contrast to traditional risk assets. During the same period, Dow Jones futures fell by 180–200 points, S&P 500 futures declined 0.5%, and Nasdaq futures dropped 0.7%. The divergence suggests that Bitcoin may be temporarily decoupling from equities, behaving less like a high-beta risk asset and more like a hedge against macroeconomic and institutional uncertainty.
BITCOIN TECHNICAL ANALYSIS AND DERIVATIVES MARKET SIGNALS
From a technical standpoint, Bitcoin’s indicators remain broadly constructive. As of January 12, the 14-day RSI stands at 56.65, indicating neutral momentum without signs of overheating. The MACD histogram reading of 227.26 confirms a bullish crossover, while price action remains above both the 12-day and 26-day exponential moving averages, reinforcing short-term trend support.
Key support levels are identified at $87,200, followed by $84,000 and a broader zone between $72,000 and $68,000. On the upside, resistance is clustered near $94,000, with additional barriers at $101,000, $104,000, and the $107,000–$110,000 range. The 200-day simple moving average at $106,174 remains a significant long-term resistance level.
Derivatives data provides additional insight. Total open interest reached $61.86 billion, up 0.91% over 24 hours, while funding rates across major exchanges remained positive, indicating that long positions are paying shorts. Over the same period, total liquidations amounted to $22.03 million, with short liquidations significantly exceeding long liquidations, signaling persistent upward pressure but also elevated leverage risk.
CRYPTO MARKET SENTIMENT, FED POLITICIZATION, AND BITCOIN NARRATIVES
Within the crypto community, the Powell investigation has reinforced several dominant narratives. Despite the recent cooling in rate-cut expectations, many participants continue to view any eventual easing cycle as a structural tailwind for Bitcoin. More importantly, concerns over Federal Reserve politicization are increasingly interpreted as supportive for Bitcoin’s long-term value proposition.
Bitcoin is being framed less as a speculative asset and more as a non-sovereign store of value, designed to hedge against institutional credibility risk. Some commentators argue that a leadership change at the Federal Reserve could accelerate a shift toward more accommodative policy, further strengthening Bitcoin’s appeal in a liquidity-driven environment.
Prominent voices such as Anthony Pompliano have suggested that political pressure on the Federal Reserve could lead to weaker equities, higher volatility, a softer dollar, and stronger performance for Bitcoin and gold—a pattern partially reflected in early 2026 data.
CONCLUSION: POWELL INVESTIGATION, FED POLICY RISK, AND BITCOIN’S STRATEGIC ROLE
The criminal investigation into Jerome Powell marks a significant escalation in the long-standing tension between political authority and central bank independence. While officially centered on a headquarters renovation project, the investigation has heightened fears that monetary policy could become increasingly politicized.
In the short term, Bitcoin’s ability to hold above $90,000 while equity futures declined suggests a meaningful shift in market perception. Rather than trading purely as a risk asset, Bitcoin is increasingly functioning as a hedge against institutional uncertainty and fiat policy risk. Technical indicators and derivatives positioning support this view, even as leverage-related risks remain.
Looking ahead, the investigation introduces a new layer of complexity into an already fragile macro environment. If leadership changes or political pressure accelerate a dovish policy shift, the resulting liquidity dynamics could provide a meaningful medium-term tailwind for Bitcoin. Ultimately, while the investigation raises short-term uncertainty, it may strengthen the structural case for Bitcoin as a hedge against the erosion of monetary credibility.
The above viewpoints are referenced from Ace
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