How will the Trump-Powell debate affect Bitcoin?

At the beginning of the year, Bitcoin followed its usual trajectory amidst macroeconomic uncertainty, fluctuating with interest rates, the US dollar, and risk appetite. However, this week the market focus shifted from "what central banks will do" to "whether central banks can make decisions without being forced," with the core trigger being the escalating conflict between Trump and Federal Reserve Chairman Powell. Powell claimed to be threatened with a grand jury subpoena and criminal charges from the Justice Department regarding his testimony before Congress concerning the renovation of the Federal Reserve building. The White House and Trump denied any wrongdoing, but the market has begun to reassess the risks. In the initial market reaction, gold surged to a record high of nearly $4,600 per ounce, the US dollar weakened, US stock futures fell, and Bitcoin initially rose and then fell due to "reputation hedging" sentiment. This linkage highlights that the dispute is not political noise, but rather a matter of substantive trading logic: For the first time, the market has listed "Federal Reserve independence" as a core risk factor. Powell emphasized that the legal threat is a consequence of the Fed's insistence on decisions based on the public interest and its refusal to blindly follow the president's will. This confrontation is essentially a test of whether US monetary policy should be based on evidence or intimidation, and central bank independence is key to stabilizing long-term inflation expectations and preventing the politicization of currency pricing. Bitcoin's situation is rather awkward, possessing the dual attributes of a risk asset and a reputation hedging tool. Its short-term movements are more deeply influenced by the allocation of positions in financial instruments (derivatives, compliant products), but this linkage with gold indicates that investors have included it in their "policy reputation hedging" asset portfolios. The conflict between Trump and Powell will affect Bitcoin through two opposing channels: First, the liquidity channel: if the market anticipates political pressure forcing an earlier interest rate cut, lower short-term yields and a weaker dollar will benefit Bitcoin. Second, the credibility channel: if the conflict is interpreted as a signal of the Federal Reserve yielding to politics, it will trigger a credibility shock, pushing up the long-term premium for dollar assets. Bitcoin may initially fall along with the sell-off of risk assets, and then experience narrative-driven demand due to concerns about the credibility of the traditional monetary system. Two important time points to watch: the FOMC meeting on January 27-28, where Powell's response to political pressure and policy guidance will reshape market pricing; and the end of Powell's term in May 2026, with the market already anticipating "succession risks." Furthermore, the amplifying effect of spot Bitcoin ETFs cannot be ignored. They can translate institutional sentiment into price movements and trigger mechanical buying and selling during periods of heightened volatility, amplifying market fluctuations. The core issue at present is not whether the conflict will continue, but whether investors view it as a farce or a structural change in the governance of US monetary power. In the short term, Bitcoin may still be dominated by interest rates and liquidity, with the market oscillating around the January FOMC meeting and the path of interest rate cuts. If structural characteristics emerge, it will fluctuate between risk-averse selling and demand for "alternative gold." The current macroeconomic landscape may be clearer: Bitcoin is no longer simply reacting to the Fed's decisions themselves, but is beginning to respond to whether the Fed possesses independent decision-making capabilities.