Bitcoin Jumps on Fed News, But Key Metrics Flash Warning

Patrick Turner

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Cryptocurrency

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Summary:

Bitcoin briefly topped $92,000 on Fed probe news, but ETF outflows and weak sentiment challenge its safe-haven narrative.

Bitcoin briefly climbed above $92,000 after news broke that U.S. federal prosecutors have opened a criminal investigation into Federal Reserve Chair Jerome Powell. Despite this seemingly bullish catalyst, traders remain skeptical, pointing to significant outflows from Bitcoin ETFs and weak demand for leveraged long positions.

Two key indicators highlight the market's cautious sentiment:

• Institutional Selling: Bitcoin ETFs have recorded $1.38 billion in net outflows across just four trading sessions, signaling that major players are selling.

• Weak Bullish Momentum: Data from BTC futures shows a neutral 5% basis rate, well below the 10% premium that typically indicates strong bullish sentiment.

Bitcoin Lags Gold as Safe-Haven Narrative Wavers

While Bitcoin has shown some resilience, it has significantly underperformed precious metals. The cryptocurrency is still down 23% since October 2025, a period during which both gold and silver reached all-time highs in 2026. This stark divergence has led traders to question whether Bitcoin's narrative as a digital store of value is losing its strength.

A comparison of Bitcoin, Gold, and Silver performance shows a significant divergence, with Silver gaining 81.74% and Gold rising 19.76% while Bitcoin fell 22.77% since October 2025.

As a result, even if Bitcoin manages another 14% rally toward the $105,000 level, investors may remain hesitant to adopt a bullish stance. This caution is amplified as analysts become less confident that the U.S. will introduce further economic stimulus in the near future.

Fed Turmoil and a Shifting Monetary Outlook

Adding to the complex economic picture, Goldman Sachs has revised its forecast and no longer expects an interest rate cut in March. The bank cited persistent inflation and resilient labor market data as reasons for the change.

The Federal Reserve's policies have been a point of contention. U.S. President Donald Trump has openly criticized the central bank for maintaining elevated interest rates even as inflation remained above the 2% target throughout the second half of 2025. With Jerome Powell's term as Fed chair ending in April, the door is open for a successor who may be more inclined toward a looser monetary policy.

The current investigation into Powell, centered on the Fed's building renovation project, has prompted analysts to question the future of central bank independence. A potential erosion of this independence could favor alternative scarce assets like Bitcoin. Powell himself has suggested that the investigation should be viewed within the broader context of threats from the Trump administration.

Derivatives and ETF Data Reveal Cautious Traders

Even as Bitcoin reclaimed the $91,000 mark, derivatives data shows that traders are not rushing to open bullish positions. The annualized premium on BTC futures contracts, known as the basis rate, has remained near a neutral-to-bearish 5%. In contrast, periods of strong bullish sentiment are typically marked by a basis rate of 10% or more.

The 2-month BTC futures basis rate has hovered around the 5% mark, indicating neutral to bearish sentiment among derivatives traders.

More importantly, spot Bitcoin ETFs have seen four consecutive days of net outflows, totaling $1.38 billion. This trend is particularly concerning because Bitcoin has struggled to sustain levels above $94,000 over the past month, even with significant corporate buying. Strategy, led by Michael Saylor, announced on Monday its largest purchase of Bitcoin since July 2025, adding $1.25 billion worth of BTC to its holdings.

Strong Dollar Undermines "Debasement Hedge" Case

While Bitcoin may serve as an alternative hedge against the traditional financial system, there is little evidence that a crisis of confidence in the U.S. dollar is currently unfolding. Despite a $601 billion fiscal deficit in the final three months of 2025, U.S. government debt has maintained its investment-grade status, and yields on the 5-year Treasury have stayed below 3.8% for the past couple of months.

The U.S. Dollar Index (DXY) rebounded from its lows while the 5-year Treasury yield remained stable, suggesting no immediate flight from U.S. assets.

If traders were truly preparing for an economic downturn, the U.S. dollar would likely have weakened against other major currencies. Instead, the U.S. Dollar Strength Index (DXY) rebounded to 99 after hitting a low of 96.7 in late November 2025. This suggests that despite the strong rally in precious metals, there is no clear evidence of a widespread "debasement trade" in the market.

Ultimately, the appeal of Bitcoin and other cryptocurrencies remains subdued. The combination of heavy ETF outflows and muted demand for leveraged BTC positions suggests that the odds of a surprise rally toward $105,000 are relatively low in the near term.

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Economic

Dollar Under Pressure Amid Political Threats to Fed Governance

The U.S. dollar extended its losses on Tuesday, continuing a decline that began after the Trump administration opened a criminal investigation into Federal Reserve Chair Jerome Powell. This marked a serious escalation in political interference with the central bank, shaking investor confidence in the institutional integrity of U.S. monetary policy.

Market sentiment has been unsettled by the announcement, which drew widespread criticism from former Federal Reserve officials. The probe is perceived not only as a direct attack on the Fed’s independence but also as a signal of intensifying executive pressure to hasten interest rate cuts regardless of economic data. Investors are increasingly concerned about whether the Federal Reserve can maintain its credibility under mounting political scrutiny.

Measured Reaction Reflects Uncertainty, Not Complacency

While the selloff in the U.S. dollar and Treasuries was relatively modest compared to earlier political shocks such as Trump's tariff announcements in April 2025 the reaction was still significant enough to suggest more than a fleeting headline effect. The dollar index recorded its weakest daily performance in three weeks, settling at 98.92, while the benchmark 10-year Treasury yield eased to 4.1713%. This suggests that market participants are not dismissing the probe as irrelevant, but rather weighing the likelihood and consequences of further institutional erosion.

Currency strategists characterized the reaction as restrained but cautious. The mixed performance of the dollar against various currencies reflected this ambiguity. While the euro and British pound maintained modest gains 0.5% and 0.47%, respectively the Swiss franc attracted safety bids, appreciating slightly to 0.7974 per dollar. Meanwhile, the yen diverged from broader trends due to domestic political factors.

Causal Relationship Between Political Risk and Dollar Outlook

There is a discernible causal link between political interference with the Fed and the weakening of the dollar. Unlike mere correlations, which may reflect concurrent macroeconomic data or cyclical effects, the dollar's decline stems directly from institutional instability. Markets traditionally value the Federal Reserve’s independence as a cornerstone of U.S. economic resilience. When that foundation appears compromised, the relative attractiveness of U.S. assets declines, prompting capital reallocation into safer or less politically exposed currencies and assets like gold.

Fed Policy Expectations Unchanged, But Autonomy Under Scrutiny

Interestingly, the current episode has not yet altered core expectations around Fed rate cuts. Markets still anticipate two additional rate cuts in 2026, consistent with earlier forecasts. However, this stability in forecasts masks deeper unease: if the Fed appears to bow to political pressure, it may signal a dovish pivot not driven by economic fundamentals but by coercive executive influence.

This could have long-term repercussions, including higher inflation expectations and loss of confidence in Treasury instruments. Credit rating agency Fitch underscored this concern by reaffirming that Fed independence is a critical support factor behind the United States’ sovereign credit rating (AA+). Any erosion of that independence risks a structural downgrade in global investor trust.

Yen Weakens On Domestic Political Concerns

Outside of the dollar narrative, the Japanese yen faced downward pressure, dropping to a one-year low of 158.285 per dollar. The decline was driven by speculation that Prime Minister Sanae Takaichi may call a snap election as early as February. Markets interpreted this as increasing the likelihood of looser fiscal and monetary policies if her coalition consolidates power. Japanese government bonds also saw selling pressure, reinforcing expectations of a more expansionary policy stance.

Finance Minister Satsuki Katayama and U.S. Treasury Secretary Scott Bessent expressed mutual concern over the yen’s depreciation, although no intervention measures were announced.

Australia And New Zealand Currencies Hold Steady

In contrast, the Australian and New Zealand dollars remained largely stable. The Australian dollar traded at $0.6710 while the New Zealand dollar edged up to $0.5775. A private survey showed a decline in Australian consumer sentiment in January, attributed to interest rate concerns and a cloudy economic outlook. Still, these currencies exhibited resilience in the face of regional and global volatility, likely supported by commodity-linked demand and relatively neutral monetary policy paths.

The situation surrounding the Federal Reserve presents a fragile landscape. As the Trump administration escalates its public campaign against the central bank, the risk of further volatility increases. The broader financial system continues to rely on perceptions of the Fed as a neutral, data-driven institution. Undermining that perception may not only weaken the dollar in the short term, but could also have enduring consequences for the credibility of U.S. economic governance. The extent to which markets believe this is political theater or a genuine constitutional crisis will shape asset flows and currency stability in the months ahead.

Source: Reuters

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Winkelmann

Political

Economic

Members of the New York State Nurses Association union picket outside the NewYork-Presbyterian Milstein hospital, during their strike in New York City, U.S., January 12, 2026. REUTERS/Brendan McDermid

New York City nurses walked out of 10 major private hospitals across the city on Monday to demand increased staffing, funding of health benefits and protection from workplace violence often coming from patients.

Mayor Zohran Mamdani, who is just two weeks into his term, joined the picket lines to support 15,000 nurses that the New York State Nurses Association said were on strike.

"They are not asking for a multi-million dollar salary. What they are asking is for their pensions to be safeguarded, to be protected in their own workplace, to receive the pay and the health benefits that they deserve," Mamdani told reporters.

Mount Sinai said that the union's proposals would cost it $1.6 billion over three years, with a $638 million increase in nursing costs by the third year, which is 74% more than current costs.

New York State Gov. Kathy Hochul had declared a disaster emergency last week, allowing out-of-state and foreign medical personnel to cover for striking staff. The disaster emergency is in effect until February 8.

On Monday morning, dozens of nurses spoke of lack of healthcare benefits and inability to take adequate breaks during their shifts as they rallied outside a NewYork-Presbyterian Hospital in uptown Manhattan. NewYork-Presbyterian is one of three healthcare networks affected by the strike along with Mount Sinai and Montefiore.

"In the operating room, I work as a night nurse and we're always short on staffing and this is unsafe for the patient," said Michael Lazar, a 53-year-old NewYork-Presbyterian nurse.

Mount Sinai said it had secured more than 1,000 qualified and specialized agency nurses to cover for striking medics and to deliver care for "however long a strike may last."

NewYork-Presbyterian said all of its hospitals were open and continued to provide services.

Montefiore did not immediately respond to a request for comment. A notice on its website said that services would not be impacted by the strike.

The union and the hospitals held the last round of the negotiations the day before the strike, according to Mount Sinai and NYSNA. As of Monday evening, there was no information about the next talks.

Source: Reuters

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Samantha Luan

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A giant model of the official Trionda pro match ball for the FIFA 2026 World Cup is displayed inside the Adidas store in Manhattan in New York City, U.S., January 7, 2026. REUTERS/Mike Segar/File Photo

The U.S. will invest $115 million in counter-drone measures to bolster security around the FIFA World Cup and America's 250th Anniversary celebrations, the Department of Homeland Security said on Monday, the latest sign of governments stepping up drone defenses.

The FIFA World Cup will be a major test of President Donald Trump's pledge to keep the U.S. secure, with over a million travelers expected to visit for the tournament and billions more watching matches from overseas.

The threat of drone attacks has become a growing concern since the war in Ukraine has demonstrated their lethal capabilities. And recent drone incidents have worried both European and U.S. airports.

"We are entering a new era to defend our air superiority to protect our borders and the interior of the United States," DHS Secretary Kristi Noem said in a statement.

Defense companies are developing a range of technologies aimed at countering drones, including tracking software, lasers, microwaves and autonomous machine guns. The DHS did not specify which technologies it would deploy to World Cup venues.

The announcement comes weeks after the Federal Emergency Management Agency, which sits under DHS, said it granted $250 million to 11 states hosting World Cup matches to buy counter-drone technologies.

Last summer, New York Governor Kathy Hochul, a Democrat, called on Trump, a Republican, to bolster federal support for defending against drone attacks.

Source: Reuters

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Justin

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A drone view shows rotor blades and other parts for the ongoing construction of the Revolution Wind offshore wind turbine farm, staged on the State Pier in New London, Connecticut, U.S., September 23, 2025. REUTERS/Brian Snyder/File Photo

· Judge rejects national security concerns as justification for project halt

· Orsted plans to resume work on Revolution Wind immediately

· Interior Department's pause criticized for lack of transparency and due process

A federal judge on Monday cleared Danish offshore wind developer Orsted (ORSTED.CO) to resume work on its nearly finished Revolution Wind project, which U.S. President Donald Trump's administration halted along with four other projects last month.

The ruling by U.S. District Judge Royce Lamberth is a legal setback for Trump, who has spent the last year seeking to block expansion of offshore wind in federal waters. It was the second time in four months the $5 billion Revolution Wind project has sought, and won, a temporary court order to block a government stop-work order.

Orsted's Revolution Wind lawsuit is one of several filed by offshore wind companies and states seeking to reverse the Interior Department's December 22 suspension of five offshore wind leases over what it said were national security concerns around radar interference.

Monday's hearing was the first of three that will be held this week. The others involve Equinor's (EQNR.OL) Empire Wind, off the coast of New York, and Dominion's Coastal Virginia Offshore Wind facility.

There was no immediate comment from the Interior Department.

Orsted said it would resume work on Revolution Wind as soon as possible while its lawsuit progresses.

"Revolution Wind will determine how best it may be possible to work with the US Administration to achieve an expeditious and durable resolution," the energy company said in a statement.

Government attorneys had argued that the pause was justified by new, classified information regarding offshore wind's impacts on national security revealed to Interior officials by the Defense Department in November.

Lamberth rejected the administration's argument that national security concerns justified halting the project, which he said would be irreparably harmed without an injunction.

"You want to stop everything in place, costing them one-and-a-half million a day, while you decide what you want to do?" Lamberth, who was appointed by former President Ronald Reagan, asked Justice Department attorney Peter Torstensen during the hearing.

Lamberth also said he was troubled by Interior Secretary Doug Burgum's recent criticism of offshore wind for reasons unrelated to national security. In television interviews on the day Interior ordered the pause, Burgum said offshore wind was expensive, unreliable, reliant on foreign-made equipment and harmful to ocean life.

Revolution Wind attorney Janice Schneider argued the government's pause had violated federal laws governing administrative procedure and due process, adding that the developer had not been able to review the classified assessment on offshore wind.

"This Court should be very skeptical of the government's true motives here," Schneider said.

Offshore wind developers including Orsted have faced repeated disruptions to multi-billion dollar projects under U.S. President Donald Trump, who has said he finds wind turbines ugly, expensive and inefficient.

The project is about 87% complete and is expected to begin generating power this year, Orsted has said.

Revolution Wind LLC is a 50-50 joint venture between Orsted and Global Infrastructure Partners' Skyborn Renewables. Orsted has also sued on behalf of its Sunrise Wind project off the coast of New York.

Source: Reuters

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U.S. Immigration and Customs Enforcement (ICE) agents stand guard during protests against increased immigration enforcement and the fatal shooting of Renee Nicole Good by an ICE agent, in Minneapolis, Minnesota, U.S., January 9, 2026. REUTERS/Tyrone Siu

· Trump administration increases migrant detentions, aims for more deportations

· DHS says death rate aligns with historic norms amid rising detentions

Four migrants died while in custody of U.S. immigration authorities over the first 10 days of 2026, according to government press releases, a loss of life that followed record detention deaths last year under President Donald Trump.

The deaths included two migrants from Honduras, one from Cuba and another from Cambodia, and occurred from January 3-9, according to U.S. Immigration and Customs Enforcement.

The Trump administration aims to ramp up deportations and has increased the number of migrants in detention. As of January 7, ICE statistics showed that the agency was detaining 69,000 people. The numbers were expected to rise following a massive ICE funding infusion passed by the U.S. Congress last year.

At least 30 people died in ICE custody in 2025, the highest level in two decades, agency figures showed.

Setareh Ghandehari, advocacy director at Detention Watch Network, called the high number of deaths "truly staggering" and urged the administration to shutter detention centers.

U.S. Department of Homeland Security spokesperson Tricia McLaughlin said the rate of deaths had remained in step with historic norms as the detention population has climbed.

"As bed space has expanded, we have maintained (a) higher standard of care than most prisons that hold U.S. citizens — including providing access to proper medical care," McLaughlin said.

The Cuban detainee, Geraldo Lunas Campos, 55, died on January 3 in Camp East Montana, a detention site opened by the Trump administration on the grounds of Fort Bliss in Texas.

ICE said it was investigating the death of Lunas, adding that officials said he had become disruptive and placed him in isolation. Officials later found him in distress, and emergency medical technicians pronounced him dead, ICE said.

The two Honduran men - Luis Gustavo Nunez Caceres, 42, and Luis Beltran Yanez–Cruz, 68 - died in area hospitals in Houston and Indio, California, on January 5 and 6, respectively, both following heart-related issues, ICE said.

Parady La, a Cambodian man, 46, died on January 9 following severe drug withdrawal symptoms at the Federal Detention Center in Philadelphia, ICE said. The administration began using that space last year, it said.

The Trump administration has greatly reduced the number of migrants released from detention on humanitarian grounds, a move critics say has driven some to accept deportation.

In addition to the in-custody deaths, an ICE officer fatally shot a Minnesota mother of three last week, an incident that sparked protests in Minneapolis and cities around the country.

Source: Reuters

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Gold Consolidates After Political Pressure Targets Fed Leadership

Gold steadied on Tuesday morning, trading around $4,585 per ounce after surging 2% in the previous session. The rally was driven by growing investor anxiety over the Federal Reserve’s institutional autonomy, following an unprecedented escalation from the Trump administration. President Trump threatened criminal indictment against Fed Chair Jerome Powell, intensifying fears of political interference in monetary policymaking.

The immediate market response suggested a strong causal relationship between the political developments and a shift in asset preferences. Investors reacted by retreating from the U.S. dollar and Treasuries, opting instead for gold, which has traditionally served as a hedge against both inflation and systemic instability. This reaction underscores market sensitivity to governance risks that could undermine the Fed’s credibility in maintaining price stability.

The dollar fell on Monday while U.S. Treasury yields rose across maturities, reflecting capital outflows and diminished demand for dollar-denominated assets. This dynamic is often referred to as the “debasement trade,” where concerns about political or fiscal instability drive investors toward real assets like precious metals.

Gold’s Momentum Reinforced By Structural and Geopolitical Factors

While the immediate driver of gold’s latest move was political in nature, broader conditions have been reinforcing its longer-term trajectory. The yellow metal entered 2026 on strong footing, following a series of record highs in the previous year fueled by similar attacks on the Fed, geopolitical unrest, and tightening physical supply.

Citigroup has now revised its short-term forecast, projecting gold to reach $5,000 per ounce and silver to hit $100 within three months. This revision is rooted in the expectation that persistent instability whether political, geopolitical, or institutional will continue to drive demand for hard assets. The forecast assumes that both physical shortages and investor hedging behavior will support elevated pricing levels, independent of short-term rate fluctuations.

Tensions Between Politics and Monetary Policy Influence Gold Valuation

Although no formal indictment has occurred, the mere threat against Powell introduced a disruptive variable into monetary policy expectations. The Fed's ability to respond to inflation with credibility rests heavily on its perceived independence. If investors believe the central bank is vulnerable to executive pressure, inflation expectations may become unanchored, indirectly supporting gold prices.

This interaction demonstrates a causal link rather than a coincidental correlation. The political narrative has actively reshaped market expectations, weakening the dollar and bolstering gold’s attractiveness as an alternative store of value.

Silver Also Retreats Slightly But Maintains Elevated Levels

Silver, which often tracks gold’s direction but with greater volatility, fell 1.4% on Tuesday after surging over 6% the day before. This suggests some profit-taking but still reflects underlying support from the same macro factors influencing gold.

Despite a minor retreat in spot gold prices in Asian morning trading, investor sentiment remains favorable toward precious metals. The Bloomberg Dollar Spot Index held steady, signaling that the prior day’s dollar weakness may persist if political volatility continues.

Overall, with the intersection of institutional threats, geopolitical tensions, and supply constraints, gold’s trajectory remains upward-leaning in the near term. The market’s reaction illustrates that political shocks particularly those that call into question the Fed’s integrity can materially reshape capital flows and asset pricing, sustaining bullish momentum for gold.

Source: Bloomberg

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Bitcoin Jumps on Fed News, But Key Metrics Flash Warning

Bitcoin Lags Gold as Safe-Haven Narrative Wavers

A comparison of Bitcoin, Gold, and Silver performance shows a significant divergence, with Silver gaining 81.74% and Gold rising 19.76% while Bitcoin fell 22.77% since October 2025.

Fed Turmoil and a Shifting Monetary Outlook

Derivatives and ETF Data Reveal Cautious Traders

The 2-month BTC futures basis rate has hovered around the 5% mark, indicating neutral to bearish sentiment among derivatives traders.

Strong Dollar Undermines "Debasement Hedge" Case

The U.S. Dollar Index (DXY) rebounded from its lows while the 5-year Treasury yield remained stable, suggesting no immediate flight from U.S. assets.

Dollar Slips as Political Pressure on Fed Raises Market Anxiety

Dollar Under Pressure Amid Political Threats to Fed Governance

Measured Reaction Reflects Uncertainty, Not Complacency

Causal Relationship Between Political Risk and Dollar Outlook

Fed Policy Expectations Unchanged, But Autonomy Under Scrutiny

Yen Weakens On Domestic Political Concerns

Australia And New Zealand Currencies Hold Steady

Source: Reuters

Severe Staffing Shortages Expected At New York Hospitals As 15,000 Nurses Go On Strike

Members of the New York State Nurses Association union picket outside the NewYork-Presbyterian Milstein hospital, during their strike in New York City, U.S., January 12, 2026. REUTERS/Brendan McDermid

Source: Reuters

US Invests In Counter-drone Tech To Protect FIFA World Cup Venues

A giant model of the official Trionda pro match ball for the FIFA 2026 World Cup is displayed inside the Adidas store in Manhattan in New York City, U.S., January 7, 2026. REUTERS/Mike Segar/File Photo

Source: Reuters

US Judge Lets Denmark's Orsted Resume Rhode Island Offshore Wind Project That Trump Halted

A drone view shows rotor blades and other parts for the ongoing construction of the Revolution Wind offshore wind turbine farm, staged on the State Pier in New London, Connecticut, U.S., September 23, 2025. REUTERS/Brian Snyder/File Photo

Source: Reuters

Four Migrants Die In US Immigration Custody Over First 10 Days Of 2026

U.S. Immigration and Customs Enforcement (ICE) agents stand guard during protests against increased immigration enforcement and the fatal shooting of Renee Nicole Good by an ICE agent, in Minneapolis, Minnesota, U.S., January 9, 2026. REUTERS/Tyrone Siu

Source: Reuters

Gold Holds Gains Amid Fed Autonomy Concerns and Trump-Induced Market Turbulence

Gold Consolidates After Political Pressure Targets Fed Leadership

Gold’s Momentum Reinforced By Structural and Geopolitical Factors

Tensions Between Politics and Monetary Policy Influence Gold Valuation

Silver Also Retreats Slightly But Maintains Elevated Levels

Source: Bloomberg

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