Powell Investigation and Soft CPI Reshape Rates Outlook, Bitcoin Tests Path to $100K
Digital Asset Market: The cryptocurrency market is witnessing renewed vigor as Bitcoin surged over 2% to break above $93,500, responding to steady U.S. inflation data and ongoing political instability. This upward momentum was mirrored by altcoins, with ether (ETH) and BNB both climbing by around 1.5%-1.7%, while the broader CoinDesk 20 index also recorded gains. The price rally comes amid growing optimism for additional Federal Reserve rate cuts in 2025, as inflation and core CPI figures supported the case for a continued soft landing in the U.S. economy. Despite weakness in traditional equity markets, both crypto assets and gold have advanced further, illustrating renewed investor appetite for alternative and risk assets. Meanwhile, in the derivatives landscape, Bitcoin options open interest has surged to $65 billion, eclipsing futures at $60 billion, indicating that institutional investors are increasingly focusing on risk management and volatility strategies rather than high-leverage speculation.
Macro Economics: China has strongly criticized President Trump’s announcement of a new US policy that will impose a 25% tariff on any country conducting business with Iran, warning that such measures risk derailing the recently reached US-China trade deal. The Chinese Foreign Ministry condemned the move and vowed to protect China’s interests, while the Chinese embassy in Washington called the tariffs legally excessive. The policy comes as violence and unrest escalate in Iran, with President Trump also threatening military action and pledging to support anti-government protesters. The Iranian currency has plummeted under ongoing US sanctions, deepening economic woes and fueling protests, which Iranian authorities claim are being exploited by foreign powers seeking to destabilize the country.
In other news, China has informed some tech companies that purchases of Nvidia’s advanced H200 AI chips will be approved only under special circumstances, such as university research, signaling ongoing caution about fully reopening its market to Nvidia. The directive was deliberately vague about what constitutes “necessary” purchases and follows earlier requests that some firms pause H200 orders, as China aims to prioritize its domestic AI sector. This move highlights Nvidia’s challenging position between stricter US export controls and China’s efforts to reduce reliance on foreign technology.
Equities: US stocks were mixed on Tuesday as new inflation data showed price pressures easing, supporting expectations that the Federal Reserve will hold interest rates steady for now, while JPMorgan kicked off the fourth-quarter earnings season with a disappointing report due to a major hit from its Apple Card partnership, causing its shares to fall. The Dow Jones Industrial Average dropped about 0.6%, and the S&P 500 was little changed, while the Nasdaq rose by 0.3%, boosted by strong gains in chipmakers like Advanced Micro Devices and Intel after analyst upgrades. Despite JPMorgan beating expectations for headline numbers, its investment banking fees missed and financial stocks broadly fell, also weighed down by President Trump’s recent demands including a proposed cap on credit card interest rates, restrictions on defense sector dividends and stock buybacks, as well as a ban on big investors buying more single-family homes, changes that market participants say would likely face legal challenges. Meanwhile, oil prices climbed after Trump cancelled meetings with Iran and threatened tariffs on countries doing business with Tehran, adding to geopolitical jitters. The market’s leadership has shifted in early 2026 toward traditional industrial stocks like Boeing and Caterpillar, which have posted double-digit gains, while major tech and fintech names such as Visa and Salesforce have registered declines for the year.
The Fed and US Treasury: The Consumer Price Index showed annual headline inflation at 2.7% and “core” CPI at 2.6%, marking the slowest pace since early 2021 and broadly meeting forecasts, which, along with a recent softer jobs report, further underpinned market bets that the Fed might not move rates soon, with futures pricing in possible cuts later in the year. Investors are also digesting a politically charged criminal investigation into Fed Chair Jerome Powell, who has called it an attack on central bank independence, while Trump renewed criticism of Powell and maintained pressure for more aggressive stimulus. President Donald Trump escalated his verbal attacks on Federal Reserve Chair Jerome Powell by calling him either incompetent or crooked, referencing cost overruns in the renovation of the Fed’s headquarters, which is under investigation by Trump’s own Department of Justice. This probe, reportedly related to Powell’s congressional testimony about the project, is facing growing bipartisan criticism, with lawmakers and financial leaders like JPMorgan Chase CEO Jamie Dimon warning that it threatens the Fed’s independence. Trump denied that the DOJ action on Powell is related to disagreements over interest rates, while Powell suggested the investigation is politically motivated and tied to ongoing White House pressure to lower rates. Treasury Secretary Scott Bessent and Attorney Jeanine Pirro have also weighed in, reflecting a broader debate over the central bank’s autonomy and the legal scrutiny facing its leadership.
Geopolitical: Oil prices surged after President Trump urged Iranians to continue protesting, telling them to “take over your institutions” and promising that “Help On its Way,” fueling speculation about possible imminent US intervention. Amid violent clashes and rising casualties, the Iranian government summoned European ambassadors and shared videos showing protesters using firearms and causing destruction, insisting that foreign support for the unrest must stop. Meanwhile, both American and Iranian officials traded accusations of foreign interference, with Iran blaming US and Israeli intelligence for stoking the violence. The unrest, sparked by economic woes and a plummeting currency, has led to hundreds of deaths, increasing international tension, especially as calls for regime change and symbolic protests, like replacing the Iranian flag in London with the Shah’s, gain momentum.
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Bitcoin Tests a Well-Defined Ceiling as Macro and Policy Signals Align
Bitcoin remains capped by a dense resistance band between $93,500 and $95,000, a level that has constrained upside for nearly two months. A sustained break above this range would materially improve the technical setup and could open a path toward $100,000, particularly if upcoming U.S. retail sales and housing data confirm ongoing consumer resilience. From a policy perspective, incremental progress on U.S. crypto legislation, including a Senate framework addressing stablecoins and DeFi, continues to support the narrative of institutional adoption. That said, the market remains sensitive to broader political noise, with macro volatility limiting follow-through so far.
Fed Independence Comes Into Focus as a Market Risk Factor
Renewed political pressure on the Federal Reserve, including discussion of criminal investigations into Chair Jerome Powell, represents a meaningful risk to market confidence. Fed independence is a cornerstone of U.S. financial credibility, and any perception that monetary policy could be subordinated to political objectives introduces uncertainty that markets price quickly. Senior industry voices, including leadership at JPMorgan and BNY Mellon, have emphasized that even the appearance of politicized central banking raises risk premiums and undermines long-term stability.
Higher Term Premiums Are the Likely Market Response
If confidence in Fed independence erodes, the most immediate consequence is likely higher long-term interest rates rather than easier financial conditions. Investors would demand greater compensation for policy uncertainty, steepening parts of the yield curve, and increasing borrowing costs across mortgages, corporate credit, and sovereign debt. This dynamic would weigh on growth-sensitive assets while adding friction to risk markets broadly. For digital assets, macro stability remains a prerequisite for sustained upside, reinforcing that Bitcoin’s next leg higher will depend as much on institutional trust and policy credibility as on technical breakouts.
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The 1Konto Team
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