Crypto Rebounds After Fed Decision as Analysts Raise Alarm Over Central Bank Independence
Bitcoin and other major cryptocurrencies bounced back from early losses on Wednesday as concerns mounted over the Federal Reserve’s independence, following a divided policy decision that highlighted growing political influence from former President Donald Trump.
The Fed held its benchmark interest rate steady at 4.25%, in line with expectations. However, two Trump-appointed officials—Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman—dissented, favoring a rate cut. The rare split vote has fueled debate about the central bank’s autonomy and the broader implications for markets.
Fed Chair Jerome Powell emphasized that monetary policy would remain focused on taming inflation, distancing the central bank from political calls to ease borrowing costs. During Powell’s press conference, bitcoin (BTC) briefly dropped to $116,000, with ether (ETH), XRP, and solana (SOL) following suit in a broad selloff that flushed out leveraged positions.
The downturn proved short-lived. By late Wednesday, BTC had rebounded to $118,400, while ETH and XRP recovered to $3,870 and $0.00314 respectively, according to CoinDesk data. The CoinDesk 80 Index rose 0.8% to 915, reflecting broader market recovery.
“The dissenting votes raise real concerns about the Fed’s independence,” said Jimmy Yang, co-founder of Orbit Markets. “That’s a structural tailwind for crypto. Bitcoin especially thrives in environments where confidence in central banking is weakened.”
Yang added that while the Fed is unlikely to cut rates imminently, upcoming data—particularly the July Consumer Price Index (CPI)—could shape the market’s next move. “If CPI rises as new tariffs take effect, risk assets could retreat again. But if inflation lingers, crypto might rally on renewed hedge demand.”
Greg Magadini, director of derivatives at Amberdata, echoed those concerns. “Markets are watching for signs of political interference at the Fed. If Powell’s leadership is undermined or if premature cuts are forced, hard assets like bitcoin could benefit significantly,” he said.
Magadini pointed to bond market trends as a warning sign. “Since Trump’s campaign ramped up, long-dated yields have climbed sharply. The 10s30s spread widened from 15 to 55 basis points, and 2s10s from 5 to 45 basis points. These shifts suggest long-term inflation expectations are rising.”
He concluded: “The Fed’s credibility is crucial for financial markets. If that falters, crypto stands to gain as an alternative asset class insulated from centralized monetary policy.”
