Bitcoin, XRP, Ether recoup overnight losses as analysts point to growing threat to Fed independence

Major cryptocurrencies have reversed overnight losses, with analysts asserting that Wednesday's Fed decision underscored President Trump's growing influence over the central bank, strengthening the long-term bullish case for crypto.

The Fed kept the benchmark interest rate steady at 4.25% as expected, and Chairman Jerome Powell dampened prospects of renewed rate cuts from September, stressing that the central bank is focused on controlling inflation—not on government borrowing or home mortgage costs that Trump wants lowered.

Powell's comments rocked the crypto market, with Bitcoin (BTC) falling to $116,000. XRP, Ether (ETH) and solana (SOL) also fell, shaking out leveraged bets from futures markets.

These losses, however, have been reversed. As of the time of writing, BTC was trading at $118,400, with XRP and ETH changing hands at $ 0.00314 and $3,870, according to CoinDesk data. The CoinDesk 80 Index, a broader market gauge, hovered near 915 points, up 0.8% over the 24 hours.

Jimmy Yang, co-founder of Orbit Markets, said that the overnight Fed decision revealed a threat to the Fed's independence.

While the central bank held rates steady, two policymakers – Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller, both appointed to the board by President Donald Trump - dissented, favoring a rate cut.

Trump has repeatedly criticised Powell for keeping interest rates elevated and costing the United States billions of dollars. Note that both Wallet and Bowman have publicly advocated for rate cuts in recent weeks.

"There are increasing concerns about the Fed’s independence as two of Trump’s appointees voted for a rate cut last night; this should strengthen the case for crypto in the long term," Yang told CoinDesk.

He added that with no immediate rate cut in sight, the market could continue to trade largely directionless, awaiting fresh catalysts – the July CPI release.

"CPI is likely to rise when the tariffs kick in over the next few months. Cryptocurrencies might sell off initially alongside broader risk assets. However, if inflation fears persist, crypto might rebound as a hedge narrative re-emerges, especially for bitcoin," Yang noted.

Greg Magadini, director of derivatives at Amberdata, said that while the Fed's decision was in line with expectations, concerns about the Fed's independence linger.

"The biggest looming question this year for the bond market is around Fed independence. Wednesday's decision helped the Fed defend its independence. Still, if Powell is fired or begins to cut rates too early, I expect hard assets (BTC, especially) to rally significantly. At the same time, inflation and bonds would likely lose considerable value," Magadini noted. "Today the U.S. credit markets rely on Fed independence."

Magadini explained bond markets continue to price in long-term inflation, which weakens the case for rapid fire rate cuts to ultra-low levels, as desired by Trump.

"We've seen long-bond yields rise a lot since Trump's election. 10s30s moved from 15bps to 55bps and 2s10s from 5bps to 45bps.

This means the bond market continues to price in long-term inflation, especially given that "real yields" are historically positive... should inflation remain where it is today," Magadini said.