Trump Slams Rate Hike as Too Small, BTC Breaks 90K Again: This is Not Volatility, It's a "Power Clash" Crushing the Market — On the Politicalization of US Monetary Policy and the Reconstruction of Crypto Asset Pricing Mechanisms

The recent turbulence in the financial markets at the close of 2024 is far more profound than a 25 basis point rate cut. When Fed Chair Powell announced a reduction of the federal funds rate target to 4.25%-4.50%, the market did not respond with the typical risk asset rally. Instead, Bitcoin (BTC) briefly hit a high of $94,500 before sharply dropping below $90,000, with trading volume and volatility surging simultaneously. The root of this abnormal phenomenon is not merely monetary policy operations but a forceful public challenge by former President Trump: "The rate cut is too small, it should be at least doubled" — and a more disruptive hint: "I may replace the Fed Chair."

The weight of these two statements is enough to instantly signal a fundamental paradigm shift: US monetary policy is shifting from "economic cycle-driven" to "political cycle-led." BTC's plunge is not simply a technical correction but a market-sensitive "expectation asset" that is first to reassess risks posed by systemic power conflicts. This article aims to analyze the deep logic of this conflict, its market transmission mechanisms, and its long-term impact on crypto asset pricing frameworks.

一｜After the Rate Cut, BTC Falls Instead of Rises: Asset Pricing Failures in a Policy Divergence Environment

Traditional monetary transmission theory suggests that rate cuts should elevate risk asset prices by lowering risk-free rates and increasing risk premiums. Especially amid persistent ETF inflows and a strong US stock market, BTC’s decline appears highly abnormal. BiyaPay analysts’ insight hits the mark: "This round of rate cuts has failed to change fundamental uncertainties about future economic and inflation paths." This indicates that the market is not in a typical "easy money" environment but has entered a highly dangerous "Policy Divergence Regime."

A policy divergence market is characterized by a lack of broad social consensus on monetary policy direction, with conflicting interests among different power centers. Asset prices are no longer driven solely by fundamentals or liquidity but by panic over "policy rule uncertainty." Features include: disconnection of traditional correlations (e.g., rate cuts detaching from risk assets), asymmetric volatility amplification, and short-term shocks that vastly outweigh long-term impacts.

The reason this rate cut is "necessary, not voluntary" lies in its background of stagflation—marginal labor market softening combined with sticky inflation. The Fed’s indecision between dual mandates makes this rate cut more a passive response to economic data rather than a vote of confidence in growth prospects. In such a scenario, BTC, which is least sensitive to "future liquidity expectations" and most sensitive to "current systemic stability," naturally exhibits a defensive stance of "refusing to rise." The market is not lacking liquidity but trust in policy continuity.

二｜The Damaging Power of Trump’s Remarks: Systemic Shock to Fed Authority

Trump’s criticism triggers market volatility not because of its economic logic but due to its systemic challenge to the independence of the Federal Reserve. One of the pillars of the modern financial system is the Fed’s independence from short-term political pressures, based on economic data and professional judgment. When a highly likely presidential candidate openly questions Fed decisions and hints at personnel intervention, the impact on market confidence far exceeds any data surprise.

Specifically, this shock manifests on three levels:

First, the collapse of policy rule predictability. Markets rely on modeling the Fed's reaction function to price assets. When the Fed leadership becomes a variable in political bargaining, the reaction function loses stability, rendering historical predictive models ineffective. Investors cannot predict whether future monetary policy will follow the Taylor rule or political election cycles.

Second, the erosion of long-term inflation anchoring. Central bank independence is key to anchoring inflation expectations. Political interference historically leads to moral hazard in monetizing fiscal deficits, causing market re-pricing of inflation risk premiums. BTC’s decline partly reflects doubts about its "digital gold" anti-inflation properties in an extreme politicized environment.

Third, a visible conflict of power balance. Trump’s remarks expose and intensify the potential tension between the Fed and the executive branch. Markets are forced to price in additional risk premiums from "systemic conflict risk." This premium is not fully captured by volatility indices (like VIX) but manifests as confusion in cross-asset correlations and a redefinition of safe-haven assets.

As a "marginal asset" intertwined with "mainstream assets," BTC’s holder base—comprising hedge funds and sovereign wealth funds sensitive to systemic risks—is rapidly shifting away. These institutions’ first response to systemic risk is to reduce holdings of the most politically uncertain assets, with BTC being a prime candidate.

三｜BTC Price as a Language: Market Rejects "Fake Easing"

The retracement of BTC from $94,500 to below $90,000 essentially signals a clear market judgment: "We don’t trust your rate cuts." This is a direct denial of the current monetary policy’s effectiveness and a dismantling of the traditional "rate cut risk asset rally" narrative.

The contradictions in the current market environment are reflected in four dimensions:

• Divergence between rate cuts and economic outlook: rate reductions have not been accompanied by upward revisions in growth expectations and have instead worsened recession fears due to Trump’s remarks.

• ETF inflows versus selling pressure: spot Bitcoin ETFs show net inflows, but miner sell-offs, long-term holders cashing out, and macro hedge fund shorting exert stronger downward pressure.

• Optimism in US stocks versus weak BTC structure: the S&P 500 remains at record highs, reflecting traditional assets pricing in a "soft landing," while BTC divergence indicates that crypto markets are pricing "hard risks" more honestly.

• Positive news versus muted price reactions: whether rate cuts or ETF inflows, neither significantly lift prices, implying the market is waiting for a "decisive event" (Trump Card), rather than macro noise fragments.

This market behavior reveals a core issue: BTC is caught in a "macro vacuum" pricing dilemma. Without clear guidance on monetary, fiscal, or regulatory policies, BTC cannot form a trending narrative. Its price is no longer a discovery of value but a short-term speculative chip reacting excessively to any turbulence. This state may persist until the dust settles from the 2025 US election and policy uncertainty clears.

四｜Trump’s Economic Logic: Maximizing Political Utility and Short-termism in Monetary Policy

To understand Trump’s dissatisfaction with the 25 basis point rate cut, one must penetrate his macroeconomic logic to its political model’s core. Trump’s economic thinking is not rooted in Keynesian or Monetarist academic frameworks but a "political utility function"—maximizing voters’ perceived economic well-being during election cycles to support electoral support.

Within this logic, monetary policy is toolized for election management: the larger the rate cut, the stronger the short-term stimulus, and the more positively voters perceive the incumbent government’s economic management. The incremental 25 basis points, in Trump’s view, is a sign of Fed timidity during a "critical political period," failing to provide the "perceived stimulus" needed to sway voters.

This logic implies two radically different future scenarios, which the market is pricing at present:

Scenario 1: Trump wins. The Fed’s independence will face substantial erosion, potentially shifting toward more aggressive, short-term, politically responsive monetary policies. Long-term, this could weaken the dollar’s credibility, increase inflation premiums, and theoretically benefit BTC. But immediate institutional upheaval and regulatory restructuring could cause violent volatility, with BTC initially undergoing a "systemic risk discount."

Scenario 2: Trump loses. If the Democratic candidate continues the current economic policies, the Fed’s independence will be preserved, returning monetary policy to a data-dependent, predictable framework. This would restore policy predictability, lower risk premiums, but may also entail slower growth and stricter regulation, constraining crypto’s long-term development.

BTC’s current volatility reflects the market’s ongoing discounting and hedging between these two paths. Its price is no longer a single expectation but a probability-weighted mix of two highly divergent futures.

五｜The Amplification of "Unanchored Market" Volatility: When Policy Anchor Disappears

BiyaPay’s warning about "short-term volatility amplification" accurately describes the current "Unanchored Market" (Anchorless Market). This does not mean the absence of trading entities but the disappearance of "policy anchors" that guide asset prices, leading to directional chaos.

Its technical features include:

1. Uncertain Fed policy direction: Data dependence means each release can reverse short-term expectations, causing overreaction.

2. Increased political intervention: Candidate statements, poll shifts, and electoral college negotiations become pricing factors—not traditional economic drivers.

3. High divergence in market expectations: institutional forecasts of 2025 interest rates reach historical highs in variance, with both bulls and bears lacking confidence to add positions.

4. Fragmented liquidity: amid ongoing QT, market liquidity appears fragmented and event-driven rather than trend-driven.

5. Both bears and bulls hesitant to go all-in: rising asymmetry in volatility blurs risk-adjusted returns, leading to conservative positions and reduced market depth.

In this structure, crypto assets like BTC exhibit a bizarre "ceiling in gains (regulatory, systemic uncertainty), no floor in declines (liquidity drain, chain reactions)." The breach below $90,000 is not merely a technical support failure but a self-reinforcing emotional release triggered by the lack of policy anchors.

Conclusion: The Persistence of Power Conflicts and the Paradigm Shift in Crypto Assets

The market’s most common concern—"Does BTC dropping below 90K mean a collapse?"—is superficial. The real core question is: "How long will the systemic power conflict between 'US and Trump' last, and how will it reshape global asset pricing rules?"

As long as these conflicts persist, BTC will not establish a unidirectional trend. It will oscillate amid political noise, macro data, and liquidity fragmentation, serving as a real-time barometer of "systemic instability." For traditional investors, this environment is a nightmare; for traders who understand its logic, it’s a fertile ground for volatility strategies.

Deeper still, BTC’s recent decline signals a paradigm shift: crypto assets are transforming from "marginal speculative instruments" into "macro hedging tools." They are no longer just leverage amplifiers in risk-on environments but early warning systems for systemic risk exposure. The erosion of policy trust will manifest first and most brutally in BTC prices.

The unsettling truth at the end of 2024 is that when the world’s largest economy fails to reach even minimal political consensus on its monetary policy, all asset pricing logic must incorporate the new dimension of "systemic collapse risk." BTC’s volatility is only the first thunderclap of this silent crisis.