Fed Politics Collide with Cryptocurrency Demand

Central Bank's Interest Rate Cut Triggers Turmoil: The U.S. Federal Reserve's imminent reduction in interest rates may typically spur crypto craze. However, this time, the adjustment in monetary policy is not the only issue at hand. The central bank finds itself squarely in the middle of a...

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2025 September 18 . 3:54 AM

2 min read

Fed Politics Confronts Demand for Cryptocurrency

Fed Politics Collide with Cryptocurrency Demand

The Federal Reserve, traditionally an independent institution, is facing unprecedented political pressure, with potential ramifications for various financial markets, particularly gold, Bitcoin, and cryptocurrencies.

Stephen I. Miran, a White House advisor to former President Trump, has been appointed as a Governor at the Federal Reserve. This nomination has raised concerns about potential violations of the Fed's neutrality due to his close ties to Trump and the political pressure on the Fed to lower interest rates.

If interest rates fall into an overheated economy, hard assets like gold are expected to perform well. Gold and Bitcoin, in fact, have begun to increase in value, sensing what's to come. Gold, being a traditional safe-haven asset, and Bitcoin, with its digital nature and thriving on liquidity, are pricing-in what's coming, indicating that they expect lower interest rates in a hot economic environment to push their prices higher.

Bitcoin, less twitchy around interest rates but primed for significant moves when liquidity shocks the system, and other cryptocurrencies are becoming more attractive when interest rates drop. DeFi tokens, for instance, are on the rise, as capital flows into narratives like Ethereum as 'digital oil' and Solana's adoption story. Ethereum and Solana, like growth tech stocks, are sensitive to liquidity.

However, a politicized Fed could make monetary policy volatile, potentially yanked back and forth by election cycles and public opinion. This volatility could have negative implications for crypto markets, as they dislike uncertainty about the rules of the game.

The U.S. is entering uncharted territory with a Federal Reserve that could become a political battleground. This could impact crypto prices positively due to liquidity tailwinds, but negatively due to potential policy volatility.

Meanwhile, the Trump White House attempted to oust Fed Governor Lisa Cook, accusing her of mortgage fraud, which she called baseless and political. The Washington appeals court blocked the attempt to remove Lisa Cook from her seat on Monday.

Trump's actions suggest an attempt to bend the Fed towards his policy goals, which likely means easier money, faster rate cuts, and a Fed less insulated from political winds. Stephen Miran, a Trump-aligned economist, has declined to commit to leaving his White House role after his Fed term ends in 2026, further fuelling concerns about the Fed's neutrality.

As interest rates drop, investors start looking for yield outside traditional finance. Traders are anticipating a resumed cutting cycle by the Fed, which could lead to more capital flowing into the crypto market.

However, Democrats fear Stephen Miran will act more like a political operative than a central banker, which could make monetary policy volatile and potentially negatively impact the crypto market.

In conclusion, the politicization of the Federal Reserve could have significant implications for gold, Bitcoin, and crypto markets. While lower interest rates could lead to increased liquidity and potential gains, the volatility and uncertainty caused by political pressure could outweigh these benefits.