For years, the crypto market followed a simple rule wherein lower interest rates usually push asset prices higher. But as 2026 begins, a major political clash is showing that liquidity alone isn’t enough.
Tensions between the Trump administration and Federal Reserve Chair Jerome Powell have grown into a serious institutional conflict.
This has put crypto in a rare push-and-pull situation.
Trump—Fed and the stuck crypto market
On one side, the administration’s strong pro-crypto stance and push for lower rates should, in theory, be bullish for Bitcoin [BTC] and digital assets.
On the other hand, the attack on the Federal Reserve’s independence has unsettled large institutional investors like BlackRock and Fidelity.
Adding fuel to the fire, The Kobeissi Letter posted about President Trump’s recent remarks, where he said,
“When the market goes up, they [Fed] should lower rates.”
In his view, the Federal Reserve isn’t protecting stability but rather holding the economy back just as growth picks up.
Executives sharing concerns about the crypto market
Talking about the impact this will have on the crypto market, Farzam Ehsani, CEO of cryptocurrency exchange VALR, said,
” The very fact of a criminal investigation against the current Fed chairman appears to be a tool of pressure, signaling a deep rift within the American establishment.”
Ehsani added,
“For the crypto market, the situation is paradoxical.”
He highlights that Bitcoin is currently acting as both a safety net and a speculative gamble.
On one hand, investors are buying it as a hedge because they are losing trust in a politically pressured U.S. dollar, viewing decentralized code as more reliable than government-controlled policy.
On the other hand, the sheer chaos of this legal battle is scaring big institutional players into selling risky assets to protect their cash.
Therefore, the next move depends entirely on who wins.
If Powell holds his ground, the market will likely stabilize and return to normal trends.
But if the White House successfully forces interest rates down to 1%, a wave of cheap money could trigger a massive rally for both Bitcoin and Gold.
Bitcoin: A ‘refuge from chaos’
Echoing similar sentiments, Ray Youssef, CEO of crypto app NoOnes, noted,
“A rate cut could increase market liquidity, which would positively affect cryptocurrency growth. Perhaps this expectation is driving gold and Bitcoin higher amid red indices, making them not just assets but a refuge from chaos.”
Youssef believes that in today’s market, Bitcoin is playing a confusing double role.
On one hand, it is rising alongside gold as a safety net for investors who are losing faith in the U.S. dollar due to the intense political battle between the White House and the Federal Reserve.
On the other hand, the threat of global conflicts is making big institutional players nervous, causing them to sell off risky assets during U.S. trading hours.
Market reaction
Yet despite the uncertainty, the total crypto market value has held up well, rising 3.22% in the past 24 hours to $3.24 trillion.
The Fear and Greed Index sits at 52, or neutral, showing that investors are not fully confident yet, as per CoinMarketCap.
At the same time, many crypto assets are entering overbought levels, raising the risk of a short-term pullback.
Still, analysts are suggesting the Justice Department’s probe into Powell could ultimately drive investors toward safe havens like gold and emerging alternatives such as Bitcoin.
Final Thoughts
- The crypto market is no longer reacting only to interest rate expectations but to political pressure shaping monetary policy decisions.
- Lower rates may support crypto prices, but threats to central bank independence are unsettling institutional investors.
