Bitcoin wobbles amid uncertainty over Fed leadership

Bitcoin slid during Asian trading on Friday as speculation over the future leadership of the United States central bank unsettled risk appetite across global markets, adding to a cautious tone already shaped by shifting expectations for interest rates and liquidity.

The world’s largest cryptocurrency fell below the psychological $40,000 level before stabilising, with traders pointing to heightened volatility after reports and commentary suggested renewed political debate around the tenure and independence of the Federal Reserve chair. Ether and other major digital tokens also weakened, while technology stocks and high-growth assets showed parallel softness in early dealings.

Market participants said the immediate trigger was uncertainty rather than any confirmed policy move. Talk around whether President Donald Trump, if returned to office, might seek to replace or pressure the current Federal Reserve leadership has resurfaced in policy circles and on trading desks. Such speculation has tended to weigh on assets that benefit from predictable monetary policy, including cryptocurrencies, which remain sensitive to shifts in dollar liquidity and real yields.

Federal Reserve chair Jerome Powell has repeatedly emphasised the institution’s independence and its data-driven approach to interest-rate decisions. However, analysts note that even the perception of political interference can influence market pricing, particularly for assets viewed as proxies for global liquidity conditions.

Bitcoin has often been framed by supporters as a hedge against fiat currency debasement and political risk, yet its trading behaviour over the past several years has increasingly mirrored that of risk assets. Periods of rising bond yields and a stronger dollar have frequently coincided with drawdowns in digital tokens, while expectations of rate cuts or easier financial conditions have tended to support rallies.

The current bout of weakness comes after a strong start to the year, when bitcoin climbed on optimism surrounding exchange-traded funds tied to the cryptocurrency and hopes that the Federal Reserve would begin easing policy in 2026 as inflation pressures cooled. Those expectations have been recalibrated after a run of resilient economic data in the United States, which has kept the central bank cautious about signalling an imminent pivot.

Traders said the renewed focus on Fed leadership has added another layer of uncertainty. “Markets are comfortable when they can model policy,” said one digital-asset strategist at a Singapore-based trading firm. “Speculation about changes at the top of the Fed raises questions about continuity, and that tends to push investors to reduce exposure to volatile assets first.”

Broader financial markets reflected a similar mood. US equity futures edged lower, while the dollar firmed modestly against a basket of major currencies. Gold held steady, suggesting investors were not yet making a decisive shift into traditional safe havens, but were trimming positions perceived as higher risk.

Within the crypto market, derivatives data showed a rise in short-term hedging activity, with funding rates on perpetual futures turning less positive. That indicated traders were paying up to protect against further downside rather than positioning aggressively for a rebound. On-chain data also pointed to a slowdown in new inflows to major exchanges, a sign that fresh buying interest had paused.

Industry observers stressed that the longer-term outlook for bitcoin remains tied to structural factors such as institutional adoption, regulatory clarity and technological development, rather than day-to-day political noise. Asset managers have continued to roll out crypto-linked products, and several banks have expanded research coverage and custody services for digital assets over the past year.

At the same time, regulators in the United States and Europe have maintained a cautious stance, focusing on consumer protection, market integrity and systemic risk. That regulatory backdrop, combined with uncertainty around monetary policy, has reinforced bitcoin’s tendency to trade within broad ranges rather than sustain uninterrupted rallies.