Treasury Warns Trump Powell Probe Could Trigger Market Liquidity Crisis

VADODARA, January 12, 2026 — U.S. Treasury Secretary Scott Bessent has warned President Donald Trump that an investigation into Federal Reserve Chair Jerome Powell could destabilize financial markets, according to an Axios report. This latest crypto news highlights a critical inflection point where political intervention threatens to override monetary policy stability, creating a Fair Value Gap in risk-adjusted assets. Market structure suggests that such uncertainty could force a liquidity grab, with Bitcoin currently testing the $91,376 level amid a Fear sentiment reading of 27/100.

Market Context & Background

Historical cycles indicate that political pressure on central banks correlates with increased volatility in digital asset markets. Similar to the 2021 correction triggered by Fed taper talk, current conditions mirror a pre-liquidity crisis environment. According to the Federal Reserve's official documentation on monetary policy independence, external investigations can disrupt forward guidance, leading to erratic yield curve movements. This development follows recent regulatory shifts, including a Supreme Court ruling on tariffs that threatens dollar liquidity and Kalshi data showing a 60% probability of a Congressional stock ban. These events collectively pressure the Volume Profile of traditional and crypto markets.

What Happened?

On January 12, 2026, Axios reported that Treasury Secretary Scott Bessent cautioned President Trump against investigating Fed Chair Jerome Powell. Bessent noted, according to the report, that such a probe could heighten market uncertainty and undermine confidence. This warning comes amid a delicate macroeconomic backdrop where the Fed Funds Rate stands at 4.75%, with inflation expectations hovering near 2.5%. The direct attribution to primary source Axios confirms the political risk is not speculative but grounded in official communication channels. Market analysts interpret this as a signal that institutional frameworks are under stress, potentially triggering a Gamma Squeeze in derivatives markets.

Technical Analysis & Price Action

Bitcoin's price action at $91,376 reflects a consolidation phase within a broader descending channel. The Relative Strength Index (RSI) on the daily chart reads 42, indicating neutral momentum with bearish bias. Critical support resides at the $90,500 level, which aligns with the 50-day Exponential Moving Average (EMA). A break below this creates a Bearish Invalidation scenario, targeting the $88,200 Order Block—a zone of high liquidity accumulation from Q4 2025. Resistance is established at $93,800, corresponding to the 0.382 Fibonacci retracement from the December 2025 high. On-chain data from Glassnode indicates reduced exchange inflows, suggesting hodler accumulation but insufficient to offset macro headwinds.

By The Numbers

Why It Matters

For institutional portfolios, this event introduces a systemic risk variable that could decouple crypto from traditional equity correlations. A politicized Fed risks destabilizing the dollar liquidity pools that underpin leveraged positions in Bitcoin futures. Retail traders face increased volatility, with stop-loss clusters likely concentrated around the $90,000 psychological level. The 5-year horizon impact hinges on whether this probe materializes; historical precedent from the 2018 Fed independence debates shows that such events can compress risk premiums by 15-20% within a quarter.

Community Sentiment

Market analysts on X/Twitter are highlighting the regulatory overhang, with many noting that "political uncertainty is the new black swan for crypto." Sentiment skews bearish, as evidenced by put/call ratios in options markets rising to 0.85. Bulls argue that Bitcoin's inherent censorship resistance could benefit from fiat instability, but this narrative lacks on-chain confirmation given current net outflows from smart contract platforms.

Price Prediction / Future Outlook

Bullish Case: If the Powell probe is abandoned, market confidence could rebound, pushing Bitcoin to retest $95,000 as a liquidity target. This scenario requires holding above the Bullish Invalidation at $90,500 and a shift in the Fear & Greed Index above 50. Institutional inflows from pending ETF approvals could accelerate this move.

Bearish Case: Should the investigation proceed, heightened uncertainty could trigger a sell-off to the $88,200 Order Block. A break below this level opens a path to $85,000, aligning with the 200-day EMA. This scenario invalidates the current uptrend structure and would require a reassessment of long-term support zones.