Bitcoin dominance chart shows pressure: How the Federal Reserve's independence crisis is shaking up the crypto market

The latest actions by the U.S. judicial system cast a long shadow over the cryptocurrency space. When federal prosecutors launched a criminal investigation targeting Federal Reserve Chair Powell, global financial markets began reassessing the value of risk assets. This event not only shook investors’ confidence in the independence of the central bank but also starkly exposed the fragility of Bitcoin’s reputation as a safe haven asset. Against the backdrop of rising political uncertainty, Bitcoin’s performance was actually outpaced by traditional safe haven assets.

Powell Faces Judicial Investigation, Policy Uncertainty Rises

The federal investigation into Federal Reserve Chair Powell centers around a $250 million headquarters renovation project. His remarks during congressional testimony became a focal point, while disagreements between the Trump administration and the Fed over interest rate policies form the deeper background of this legal action. Powell publicly stated that the investigation is essentially political pressure on the central bank’s independence, stemming from his refusal to cut rates aggressively as Trump demanded.

The direct consequence of this political interference is a reassessment by investors of the stability of Fed policies. Market participants are now calculating what policy changes might mean if Powell succumbs to judicial pressure—this uncertainty has become a key variable influencing recent risk asset movements.

Safe Haven Assets Diverge, Gold Outperforms Bitcoin

In the face of tense political developments, traditional safe haven assets responded quite differently. Gold futures prices broke through $4,600 per ounce, hitting a record high. Silver performed even more impressively, recently reaching a historic high of $84.60. These precious metals demonstrated their reputation as true “safe havens” amid uncertainty.

Bitcoin (BTC), by contrast, showed a starkly different performance. Although it briefly tested the $92,000 level during Asian trading hours, reflecting initial demand for safe assets, this optimism quickly dissipated. During European trading hours, BTC fell to $90,500, and the entire crypto market retreated accordingly. As of the latest data (February 1, 2026), Bitcoin dropped to $78.77K, down 6.34% in 24 hours.

This shift profoundly reflects the market’s true sentiment: when real risk emerges, investors’ preferred safe haven remains the centuries-tested gold, not the 17-year-old digital asset.

Fed Rate Policy Expectations Shift, Reality Tightens

Analysis firm ING pointed out that the decline in the U.S. unemployment rate in December, combined with this week’s potentially higher-than-expected inflation report, will delay the Fed’s rate cut window at least until after March. This suggests that a high-interest-rate environment could persist longer.

From the signals in the Treasury market, investors do not seem to expect Powell to quickly relent under judicial pressure. The 10-year U.S. Treasury yield approaches 4.2%, while the 2-year yield reaches 3.54%, a two-week high. This indicates market expectations that the Fed will stick to its policy stance, with expectations for rate cuts remaining subdued.

In this macro context, interest-rate-sensitive cryptocurrencies lack fundamental support for an upward move. Under high interest rates, the appeal of yieldless assets naturally diminishes.

Liquidity Tightens, Institutional Risk Appetite Reassesses

Farside Investors’ data reveal an interesting phenomenon: despite overall trading volumes remaining high (the daily average trading volume of BTC spot ETFs reaching $19.5 billion), liquidity is quietly reversing.

Between January 5 and 9, the spot Bitcoin ETF experienced net outflows of $681 million, which is particularly notable amid high trading volumes, indicating that market participants are reallocating their portfolios rather than simply exiting long positions. Meanwhile, Ethereum (ETH) also experienced a weekly net outflow of $69 million, creating a similar “trade and withdraw” scenario.

But the liquidity story is not so simple. Risk assets like XRP and SOL continued to absorb funds, suggesting that capital is becoming more selective—institutional investors are beginning to differentiate the risk-return profiles of various crypto assets rather than blindly chasing the entire sector.

In the past 24 hours, assets like Ethereum, XRP, and ZEC experienced varying degrees of decline, with ZEC falling the most at 10.94%.

Derivatives Market Sluggish, Volatility Hits Cycle Lows

Chainlink (LINK) offers another perspective through its technical chart. The price is testing the downward trendline resistance since August. If this key technical level is broken effectively, it could trigger a new wave of buying interest. However, current breakout signals remain insufficient.

More noteworthy is the performance of the derivatives market. The 30-day implied volatility index for BTC and ETH is at its lowest levels in weeks, reflecting a significant decline in market participants’ expectations of price volatility. Mechanically, low volatility usually indicates a market stuck in a directional dilemma—lacking clear upward momentum and showing no signs of panic-driven downward moves.

Bitcoin Market Share Under Pressure, Dominance Under Scrutiny

Bitcoin’s market dominance chart also reflects this shift. BTC dominance remains at 59.11%, but the pressure is undeniable. When institutional capital flows become more fragmented, this concentration metric begins to appear fragile.

In terms of market cap comparison, the relative value of BTC versus gold is also adjusting: priced in gold, BTC is about 21.4 ounces, with BTC’s market cap equivalent to 6.04% of gold’s market cap. This comparison indicates that during periods of rising risk aversion, traditional assets still hold a clear advantage.

Policy Window Tightens, Market Awaits Turning Point

Overall, the recent crypto market faces multiple pressures: political uncertainty dampening risk appetite, the short-term rigidity of Fed interest rate policies limiting demand for low-interest assets, and the selective divergence in institutional liquidity reflecting declining market confidence.

The argument for Bitcoin as a safe haven appears particularly weak at this moment. History shows that during major political crises, investors tend to favor the centuries-old gold rather than emerging digital assets. This time will be no different.

Markets will await the Fed’s final response to political pressure and the real impact of macroeconomic data on interest rate expectations. At this critical juncture, Bitcoin’s dominance chart may continue to come under pressure until policy uncertainty dissipates and market sentiment stabilizes.