For more than a decade, bitcoin has been celebrated as an anti-establishment asset—a hedge against political turmoil, monetary mismanagement, and institutional failure. But as tensions flare between U.S. President Donald Trump and Federal Reserve Chair Jerome Powell, that long-held narrative is facing a fresh stress test.
On Monday, bitcoin lagged behind traditional safe havens even as political pressure on the Fed intensified, prompting investors to reassess what truly offers protection in times of uncertainty.
Powell Investigation Sparks Market Shock
The latest turmoil stems from Powell’s confirmation that federal prosecutors have opened a criminal investigation into his Congressional testimony related to the Federal Reserve’s $2.5 billion headquarters renovation. Powell characterized the probe as political pressure tied to the Fed’s refusal to cut interest rates aggressively—something Trump has repeatedly pushed for.
Markets reacted swiftly. Gold surged to a record above $4,600 per ounce, while silver climbed to an all-time high near $84.60. These moves underscored a classic flight to safety, with investors favoring assets that historically thrive during institutional uncertainty.
Bitcoin’s Brief Haven Moment Fades
Bitcoin initially appeared to join that flight. During Asian trading hours, BTC climbed to $92,000, diverging from weakening Nasdaq futures and hinting at haven demand. But the divergence didn’t last.
As European markets opened, bitcoin slipped back toward $90,500, dragging the broader crypto market lower. The retreat suggests that, at least for now, investors still see traditional safe havens as more reliable during political and monetary stress.
Privacy-focused Monero also pulled back from a record high of $598 to $571, though it remained up an impressive 15% over 24 hours. Tokens like CC, RENDER, and ZEC outperformed the market, posting gains of 4%–5%, reflecting selective risk appetite rather than broad confidence.
Yields Signal Fed Resolve
One reason bitcoin may be struggling to reclaim its “digital gold” role lies in the bond market. U.S. Treasury yields continued to rise, signaling that investors do not expect Powell to bow to legal or political pressure by cutting rates prematurely.
The 10-year Treasury yield approached 4.2%, while the two-year yield rose to 3.54%, its highest level in two weeks. Strong economic data—particularly a dip in the U.S. jobless rate—and expectations of hotter inflation readings this week have reinforced the view that rate cuts may be delayed until at least March.
Higher yields typically pressure non-yielding assets like bitcoin, limiting upside during periods of macro stress.
ETF Outflows Weigh on Crypto
Another headwind has been sustained outflows from crypto ETFs. Between January 5 and January 9, spot Bitcoin ETFs saw $681 million in net outflows, despite elevated trading volumes of $19.5 billion. Ethereum ETFs recorded $69 million in weekly outflows.
According to analysts, this doesn’t signal capitulation, but rather active repositioning. Investors appear to be rotating rather than exiting the market entirely. That view is supported by continued inflows into XRP and Solana ETFs, highlighting a selective risk-on approach instead of broad crypto exposure.
Volatility Signals a Pause
Derivatives markets echo this cautious tone. 30-day implied volatility for BTC and ETH has fallen to multi-week lows, suggesting traders expect muted price action in the near term rather than sharp breakouts.
In short, crypto markets appear stuck in a holding pattern—neither collapsing nor rallying decisively.
Bigger Picture: Safe Haven or Risk Asset?
Bitcoin’s hesitation comes at a critical moment. The investigation into Powell challenges assumptions about the political independence of the Federal Reserve, a scenario where bitcoin’s hedge narrative should, in theory, shine.
Instead, investors are still gravitating toward gold and silver, while bitcoin trades more like a risk-sensitive macro asset, influenced by yields, ETF flows, and equity sentiment.
That doesn’t invalidate bitcoin’s long-term thesis—but it does highlight an uncomfortable reality. In moments of acute institutional stress, the market still trusts centuries-old safe havens more than a 15-year-old digital one.
For now, bitcoin remains caught between identities: a revolutionary hedge against the system, and an asset still tethered to it.