The Federal Reserve's independence collapses! The US dollar's monetary trust wavers, and Bitcoin faces an epic boon

Before the Federal Reserve announced a 25 basis point rate cut in December, Trump’s economic aide and the leading candidate for Fed Chair, Kevin Hasset, publicly made a “precise prediction” of a 25 basis point cut. This collapse of independence is more frightening than the rate cut itself; financial experts point out that this is “the first domino of toppling dollar hegemony.” For Bitcoin, this is a historic opportunity: when central bank credit wavers, the value proposition of decentralized currencies is strengthened like never before.

White House Accurate Prediction Reveals Political Pressure

A 25 basis point rate cut should be an independent decision by the Fed based on economic data, but the timing was too “coincidental.” Before the decision was announced, Kevin Hasset, Trump’s economic aide and a top candidate for Fed Chair, publicly “predicted” a 25 basis point cut. This “precise prediction” from the White House core circle causes market suspicion: is this truly an independent Fed decision, or just an early “friendly gesture”?

More critically, Trump has publicly attacked Powell multiple times over the past year, accusing him of “playing politics,” and even calling for his removal. This unprecedented political pressure has already crossed the line since the Fed’s founding. Historically, even during the most severe economic crises, few presidents have openly interfered with central bank decisions. While former presidents occasionally expressed views on monetary policy, they usually respected the Fed’s independence. Trump’s approach has completely broken this tradition.

The market no longer views rate cuts as purely professional decisions but as outcomes of policy and political pressure compromises. This collapse of trust is more terrifying than the rate cut itself. An unprecedented split within the Fed further confirms these concerns. Former Philadelphia Fed President Patrick Harker said, “This is unusual. In my more than ten years working with the Fed, I have never seen such a situation.” When only 4 out of 12 regional banks support the rate cut, it is no longer a normal policy disagreement but a collective vote of no confidence in the Chair’s decision.

Hidden Money Printing Concerns Behind $40 Billion Bond Purchases

Apart from the rate cut, a more controversial move is the Fed’s announcement to buy $40 billion of short-term Treasury bills within 30 days. The official explanation is to maintain liquidity stability, technically different from quantitative easing in 2008. But the market is skeptical; against the backdrop of a persistent US fiscal deficit, investors tend to see any asset purchase as covert quantitative easing or a prelude to fiscal dominance.

Standard Chartered’s latest research shows that while the money market expects short-term interest rates to fall, concerns over Fed independence and fiscal policy are pushing up long-term US interest rates. This is the market pricing in “fiscal dominance” risks in advance. The rise in long-term rates is not a response to short-term liquidity shortages but reflects investors demanding higher term premiums to hedge potential future fiscal discipline collapses.

The logic is: political interference escalates → markets expect the Fed to be forced to cooperate with fiscal expansion → increased term premiums hedge against inflation risks → long-term bond yields rise. This “inverted” phenomenon of short-term rates falling and long-term rates rising is a clear signal of market distrust. Investors are choosing to believe the worst-case scenario—that political interference has led to covert easing, and long-term uncertainty is increasing.

According to the Daily Economic News, financial experts clearly state that the loss of Fed independence is “the first domino to topple dollar hegemony,” equivalent to a nuclear strike on dollar credibility. Once credibility is lost, regaining market trust is extremely difficult. What’s more worrying is that despite long-term damage to dollar credibility, external geopolitical uncertainties still support the dollar in the short term. This short-term safe-haven support masks the long-term, structural weaknesses caused by compromised Fed independence.

Bitcoin’s Historic Revaluation of Value

When Fed independence is questioned and dollar credibility wavers, Bitcoin’s core value proposition is strengthened like never before. Scarcity versus excessive money issuance is Bitcoin’s fundamental advantage. Bitcoin has a fixed total supply of 21 million coins, encoded in the code that no one can change. In stark contrast, the Fed might yield to political pressure and expand the money supply limitlessly.

Three Mechanisms of Bitcoin Against Central Bank Dishonesty

Algorithmic issuance: produces a fixed amount of new coins every 10 minutes; the halving mechanism ensures supply continually decreases, unaffected by political pressure.

Decentralized consensus: any proposal to change the supply requires majority agreement across the network nodes; no single government or institution can manipulate.

Transparency and auditability: all issuance records are publicly stored on the blockchain; anyone can verify, leaving no room for clandestine operations.

Historical data confirms this. During the 2020 pandemic, quantitative easing pushed Bitcoin from $3,800 to $69,000, a rise of over 17 times. This is not accidental; it is the market voting with real money for “hard currency.” Although this time only $40 billion of Treasury bills are purchased, much smaller than the liquidity infusion in 2020, concerns over “fiscal dominance” have already begun to ferment. If the Fed is hijacked by politics, future figures might be $400 billion, $4 trillion, or more. Such expectations are re-pricing Bitcoin’s anti-inflation value.

Decentralization as a defense against political interference remains another core advantage of Bitcoin. The essence of Fed independence loss is politicized monetary policy, whereas Bitcoin’s decentralization makes it inherently immune to interference by any single government or institution. No one can force the Bitcoin network to “cut rates” or “buy bonds,” nor can any president threaten to remove the “Chair” of Bitcoin. This resistance to censorship demonstrates unique value amid the trust crisis in traditional finance.

The Time for Asset Reallocation Has Arrived

For crypto investors, do not be fooled by short-term benefits from rate cuts. When the trust foundation of traditional financial systems is challenged, the role of crypto assets is undergoing a fundamental transformation—from “speculative tools” to “structural options for hedging sovereign credit risks.” It’s important to note that the high volatility of the crypto market makes it unsuitable for all investors, but in the current environment where Fed independence is challenged, its allocation value deserves reevaluation.

The true test will come during an overheated economy. If inflation rises and the Fed is forced to delay rate hikes due to political pressure, independence will be completely lost. At that point, not only the dollar but the entire dollar hegemony system will face restructuring. History often unwittingly shifts, and when people begin to doubt the independence of central banks, decentralized currencies are no longer utopias but increasingly realistic options.