Despite the Federal Reserve's vow to remain neutral, the cryptocurrency markets are experiencing significant downturns

Amid ongoing market turbulence, the independence of the U.S. Federal Reserve in its policy decisions has once again become a focal point. Recently, Federal Reserve Chair Jerome Powell stressed that the central bank’s monetary policy choices are guided strictly by economic data, not political agendas. This reaffirmation comes at a time when both the cryptocurrency sector and broader stock markets have experienced notable downturns [1].

The Fed’s latest move—a 50 basis point reduction in interest rates—was enacted in response to signs of easing inflation and a weakening job market. This decision has sparked debate regarding its effects on riskier assets. Although the rate cut was intended to support economic momentum, it coincided with a steep decline in cryptocurrencies such as

(ETH), which dropped below $4,000 as liquidations surpassed $1.7 billion. Experts observed that, despite being described as a technical adjustment, the Fed’s action shifted investor sentiment, prompting a reassessment of expectations for further monetary easing [7].

Powell’s forthcoming remarks on the broader economic outlook are expected to influence short-term market trends. He has made it clear that any future policy changes will be based solely on economic indicators like employment and inflation, rather than outside influences. This philosophy is consistent with the Fed’s historical focus on long-term economic health over immediate political concerns. Nonetheless, the recent swings in crypto prices—especially as Ethereum tests key support levels—highlight how sensitive digital assets are to perceived changes in central bank policy [9].

Activity in derivatives and options markets further illustrates the Fed’s sway over investor risk preferences. For December 2025 contracts, Ethereum’s implied volatility (IV) surged to 62.57%, significantly higher than Bitcoin’s 38.86%, as traders sought protection against further declines. This gap points to Ethereum’s increased technical risk after falling below $4,000. In contrast, Bitcoin’s steadier IV suggests it is seen as a relative safe haven during uncertain times, a pattern that may continue if the Fed upholds its impartial approach [13].

The Fed’s focus on remaining above political influence has also become more prominent amid global economic headwinds. Ongoing inflation and worldwide uncertainty have triggered withdrawals from crypto ETFs and a rise in leveraged short positions. Despite this, institutional investors are still accumulating Ethereum, with blockchain data revealing that 420,000

were pulled from exchanges this week. This trend indicates a split between short-term speculative selling and long-term optimism, which could strengthen if the Fed’s clear communication helps steady market expectations [9].

As the Fed continues to balance its goals of stable prices and full employment, Powell’s renewed commitment to impartial policy highlights the central bank’s stabilizing influence during market upheaval. While cryptocurrencies remain exposed to shifts in the macroeconomic environment, the Fed’s independent stance offers a degree of predictability in its policy responses. Investors will be watching upcoming data releases and Powell’s statements closely to determine whether the Fed’s dedication to nonpartisan decision-making can help reduce further volatility in the near future [7].