Dollar Index Weakness and Bitcoin's 'Shelter' Appeal: The Aftermath of the Trump-Powell Conflict

Global financial markets are fluctuating amid policy uncertainty. The dollar index fell to 99.00 from a high of 99.26 on Friday, and US stock futures are also falling. Interestingly, Bitcoin is showing strength amidst this risk asset weakness, revealing a new market landscape.

Political Clash Over Federal Reserve Independence

Over the weekend, Fed Chairman Powell said that the Trump administration had threatened him with criminal charges regarding the renovation of the central bank’s headquarters. Powell pointed out that this move was purely politically motivated and intended to pressure the Federal Reserve to cut interest rates more aggressively.

Since taking office in 2025, President Trump has been calling on Chairman Powell to cut interest rates boldly. He even calls Powell an “idiot” and threatens to strengthen the White House’s influence on monetary policy decisions. The level Trump is demanding is an ultra-low interest rate policy with a benchmark interest rate of less than 1%, indicating that economic growth is a top priority.

Market perception reorganized as a ‘safe asset’ amid weak dollar index

The decline in the dollar index goes beyond simple exchange rate fluctuations and also spills over into the reliability of U.S. financial policy. Nasdaq futures fell 0.8%, S&P 500 futures fell 0.5%, while Bitcoin rose 1% on Monday, making an unusual move.

This suggests that Bitcoin is being revalued with a different nature than traditional risk assets. Bitcoin supporters have long seen the asset as an alternative to opposition to the traditional financial system and distrust of monetary and fiscal policies. As policy uncertainty intensifies, the demand for such ‘shelters’ seems to be increasing.

Gold, a traditional safe-haven asset, also rose in unison, hitting a new all-time high of $4,600 per ounce. The combination of weakening the dollar index, uncertainty in monetary policy, and concerns about undermining the independence of central banks is driving investors to grab assets with intrinsic value.

The impact of policy risks on the cryptocurrency market

Prediction markets are not assessing the possibility that the current political conflict will lead to Powell’s early retirement. However, there are growing concerns that continued central bank pressure could erode investor confidence and destabilize the domestic currency.

History proves this. The collapse of the Turkish lira in recent years, following Turkish President Recep Tayyip Erdogan’s intervention in central bank independence, strongly demonstrates the importance of monetary policy independence. Fortunately, the dollar still maintains its status as the world’s reserve currency, so a sharp collapse in the US is unlikely, but in the medium term, the weakening trend of the dollar index may continue.

Dual Signals in the Crypto Market: Declining Trading Volume and Adaptation by Miners

Meanwhile, spot crypto trading volume has more than halved from $1.7 trillion last year to $900 billion recently. This reflects the cooling of market enthusiasm amid macroeconomic uncertainty and cautious investor sentiment.

What’s interesting is the strategic pivot of Bitcoin miners. Many mining companies are diversifying their portfolios with AI infrastructure and high-performance computing businesses, and they continue to excel in this area. Amidst the weakness of the dollar index and policy uncertainty, the profitable business transitions of technology-based companies are a sign of the maturity of the cryptocurrency industry.

Although Bitcoin-related stocks were under widespread pressure in early January, the current BTC price is showing a 24-hour volatility of -6.23% at the $83.92K level. The price range is predominantly moving between $89,000 and $95,000, with short-term volatility still high but fundamental demand maintained.

The Relationship Between the Dollar Index and Bitcoin: Shaping a New Market Landscape

The weakness of the dollar index is acting as a factor stimulating demand for alternative assets like Bitcoin. Normally, Bitcoin has tended to go hand in hand with the Nasdaq, but as policy uncertainty intensifies, there is a movement that contradicts the Nasdaq.

This means that the cryptocurrency market is not just a high-risk speculative asset, but also a hedging against central bank policy risks. In an environment where the dollar index continues to weaken and monetary policy uncertainty intensifies, this “shelter” characteristic of Bitcoin is likely to become more prominent.

As long as the conflict between policymakers and the volatility of the dollar index persist, investor interest in crypto assets, including Bitcoin, is expected to continue.