Bitcoin distances itself from its safe haven role as Powell faces political pressure

In an unexpected twist that challenges the traditional narrative, bitcoin is not doing what it should be doing in these moments of political turbulence. Although the price is currently around $77.28K, the world’s largest cryptocurrency is failing to capture the capital flow that historically turns to safe-haven assets when political concerns intensify. What makes this difference crucial is understanding why.

The pressure scenario on Powell and its implications

The political drama intensified when federal investigators opened a criminal investigation against Jerome Powell, Chairman of the Federal Reserve. The focus: his testimony before Congress regarding a $2.5 billion renewal of the central bank’s facilities. Powell interpreted this as a direct attack on the Fed’s independence, resulting from his refusal to aggressively cut interest rates as Donald Trump has repeatedly demanded.

Meanwhile, traditional safe-haven markets reacted predictably. Gold reached new all-time highs surpassing $4,600 per ounce, while silver also set records approaching $84.60 per ounce.

How bitcoin lagged in this opportunity

Bitcoin started strong on Monday, reaching $92,000 during Asian trading, suggesting an initial search for refuge. This rare divergence from stock markets was fleeting. During European hours, the cryptocurrency corrected to $90,500 and continued weakening. Currently, the broader crypto market has also experienced pressure, with multiple altcoins recording significant declines.

Monero, the privacy token, retreated from its all-time high of $598 to $571, though it maintains a 15% gain in 24 hours. Other altcoins like CC, RENDER, and ZEC experienced sharper drops, losing between 2.87% and 7.90% in the last 24 hours according to recent data.

Why Treasury yields tell this story

The key to understanding this crypto weakness lies in US Treasury yields. These held Friday’s gains, indicating that markets do not anticipate Powell ceding under legal pressure to cut rates aggressively.

The 10-year yield approaches 4.2%, while the 2-year yield, extremely sensitive to expectations of future rates, stands at 3.54%, the highest in two weeks. ING analysts have warned that the recent decline in US unemployment and potentially elevated inflation data could prevent the Fed from lowering rates until March at the earliest.

ETF flows tell a story of diverse appetite

Another factor weighing on the crypto market is the behavior of bitcoin and ethereum ETFs. According to Timothy Misir, head of research at BRN, between January 5 and 9, Bitcoin spot ETFs recorded net outflows of $681 million despite high trading volumes of $19.5 billion. This indicates position replenishment rather than a genuine market disconnection.

Ethereum ETFs also reported weekly outflows of $69 million. However, not all was weakness: XRP and SOL ETFs continued attracting capital, reinforcing the thesis of selective risk appetite rather than a broad rejection of cryptocurrencies.

Volatility trends suggest momentary calm

Derivatives markets paint a picture of containment. The 30-day implied volatility indices for BTC and ETH hover around the lowest levels in weeks, suggesting traders anticipate a sideways market in the short term. Ethereum, in particular, has fallen to $2.29K with an 8.11% drop in 24 hours.

Technical analysis: The case of Chainlink and others

From a technical perspective, Chainlink’s LINK token presents an interesting inflection point. Its daily chart shows prices testing the resistance of a downward trendline drawn from August’s high. A move above this line would qualify as a bullish breakout, potentially driving increased demand. LINK is currently trading at $9.48.

Regulatory agenda and upcoming events

Regulation continues to gain importance. Starting January 12, Dubai’s revamped regulatory framework for crypto tokens comes into effect at its International Financial Centre, removing its list of recognized tokens and making companies responsible for the suitability of assets.

On the governance front, Extra Finance DAO is voting on the distribution of loan emissions for future periods, with veEXTRA holders using a weighted system to allocate rewards among the Base chain pools. Treehouse DAO is considering implementing a mesh bridge for assets via Chainlink CCIP.

The broader macroeconomic outlook

Globally, traditional markets have shown resilience. DJIA closed up 1.08%, S&P 500 advanced 0.93%, and Nasdaq Composite rose 1.18%. However, S&P 500 futures fell 0.63% in recent sessions, suggesting renewed concerns.

The dollar index (DXY) decreased 0.30% to 98.84, providing some relief for dollar-denominated assets. Hang Seng closed higher with a 1.44% gain at 26,608.48, while FTSE and Euro Stoxx 50 recorded smaller declines.

Bitcoin and its relationship with gold in context

Bitcoin’s dominance has remained relatively stable at 59.11%, while the Ether-bitcoin ratio stands at 0.03436. An interesting fact: bitcoin currently values 21.4 ounces of gold, with BTC’s market capitalization representing 6.04% of gold’s. This relationship underscores how, in this specific cycle, gold has captured the defensive flow that bitcoin historically aimed to compete for.

Conclusion: Narrative shift or temporary pause?

What makes this situation unique is that bitcoin is not failing due to fundamental problems, but because the market still does not recognize it as a reliable alternative to traditional safe-haven assets during political upheavals. Higher rate expectations, selective ETF flows, and focus on Treasury yields have created an environment where the largest cryptocurrency maintains its appearance as a traditional risk asset rather than an alternative monetary refuge.