Investigation of Federal Reserve Chair Powell May Indicate Risk Premium for Bitcoin, Analysts Say
Investigation of Federal Reserve Chair
The non-sovereign narrative of Bitcoin is gaining attention as reports emerge regarding an investigation into U.S. Federal Reserve Chairman Jerome Powell. Concerns are being raised about political pressure and market reactions following the launch of a federal criminal investigation related to Powell's statements before a Senate committee regarding renovations at the Fed.
On Sunday, Powell stated that the investigation is "a consequence of the Federal Reserve's interest rate decisions based on the best assessment of what will serve the public, rather than chasing the President's preferences." President Donald Trump has repeatedly criticized the Fed for not complying with his requests to lower interest rates.
This investigation introduces short-term political obstacles for all risk assets, particularly U.S. stocks. However, as analysts at the cryptocurrency exchange Bitunix suggest, a "systemic correction" in capital markets may renew demand for the "non-sovereign" traits of Bitcoin. "When confidence in the dollar's credibility and the independence of the central bank is questioned, decentralized assets tend to receive narrative-driven risk premiums," the analysts told Cointelegraph.
In the long term, should political interference in monetary policy become structural, Bitcoin's role as a "non-sovereign risk asset" is likely to be solidified.
Bitcoin has increased by 0.85% in the last 24 hours, while privacy-focused tokens like Monero (XMR) saw an 18% rise, and Zcash (ZEC) rose by 6.5% during the same period. "This environment is precisely what Bitcoin was created for," said popular Bitcoin analyst Will Clemente. "The President is coming after the Fed Chair. Precious metals are appreciating as sovereigns diversify their reserves. Stocks and risk assets are reaching historic highs. Geopolitical risk is rising," Clemente added.
Investor sentiment in the crypto market suggests a local bottom, with "smart money" not actively buying. Analysis from the crypto platform Matrixport indicates a gradual improvement in investor sentiment towards crypto, increasing the likelihood of a market recovery. "Our Greed and Fear Index forms a clear base, a condition that has historically coincided with Bitcoin's bottom phase," Matrixport reported.
However, the most successful traders in the industry, referred to as "smart money" by Nansen, continue to bet on a short-term decline in Bitcoin. Smart money traders were net short on Bitcoin by a total of 127 million dollars, with 1.6 million dollars added to shorts in the last 24 hours. Nevertheless, they were net long on Ether (ETH) for 674 million dollars and net long on XRP (XRP) for 72 million dollars, signaling a more optimistic outlook for these tokens.
