Powell Probe May Introduce Bitcoin Risk Premia, Analysts Say
Bitcoin’s role as a non-sovereign risk asset may benefit from renewed investor focus amid a criminal investigation into US Federal Reserve Chair Jerome Powell.
Federal prosecutors opened a criminal investigation into Powell over testimony he gave to a Senate committee about renovations to the Fed’s buildings.
In a Sunday statement, Powell said the investigation is “a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.” President Donald Trump has repeatedly attacked Powell and the Fed for refusing to grant his demands to cut interest rates.
The investigation introduces short-term political headwinds for all risk assets, particularly US equities. However, a “systemic correction” in equities may bring renewed demand for Bitcoin’s (BTC) “non-sovereign” attributes, according to analysts from crypto exchange Bitunix.
“When confidence in dollar credibility and central bank independence is questioned, decentralized assets tend to receive narrative-driven risk premia,” the analysts told Cointelegraph. “Over the long term, if political interference in monetary policy becomes structural, Bitcoin’s role as a “non-sovereign risk asset” is likely to be further reinforced.”
Related: Bitcoin holds $90K as ETFs wobble and institutions reposition: Finance Redefined
Bitcoin rose 0.85% over the last 24 hours, while privacy-preserving tokens Monero (XMR) rose 18% and Zcash (ZEC) rose 6.5% during the same period.
“This environment is literally what Bitcoin was created for,” said popular Bitcoin analyst Will Clemente.
“The President is coming after the Fed chair. Metals are ripping as sovereigns diversify reserves. Stocks & risk assets at record highs. Geopolitical risk rising,” said Clemente in a Monday X post.
Related: Zcash sees developer slowdown as ZEC extends two-month slide
Crypto investor sentiment signals local bottom; smart money not buying
Meanwhile, data from crypto platform Matixport is signaling a gradual improvement in crypto investor sentiment, which increases the probability of a crypto market recovery.
“The moving average of our Greed & Fear Index is forming a clear base, a condition that historically coincided with Bitcoin bottoming phase,” wrote Matrixport in a Monday X post.
Despite the improving sentiment, the industry’s most successful traders, tracked as “smart money” by Nansen, are still betting on a short-term decline in Bitcoin.
Smart money traders were net short on Bitcoin for a cumulative $127 million, with $1.6 million worth of shorts added in the past 24 hours, according to crypto intelligence platform Nansen.
Still, smart money was net long on Ether (ETH) price for $674 million and net long on XRP (XRP) for $72 million, signaling more upside expectations for these tokens.
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