Power struggle over Federal Reserve policy and Powell's 'systemic error' accusation
Potential successor to the Federal Reserve Chair, Kevin Walsh, launched a fierce attack on the current Chair Powell during the IMF annual meeting, with his core argument pointing to the 'loss of independence' of Federal Reserve monetary policy and the 'failure of inflation governance'. Walsh believes that the Federal Reserve's $7 trillion balance sheet expansion has essentially facilitated the federal government's 'reckless spending', leading to a spiraling rise in fiscal deficits and inflation risks. This accusation resonates with the Trump administration's recent criticism of Powell for 'refusing to cut interest rates', heightening market concerns over the erosion of the Federal Reserve's independence, driving a 30 basis point drop in the yield of 30-year U.S. Treasury bonds in a week, and causing safe-haven funds to surge into the treasury market.
Kevin Walsh advocates for the Federal Reserve to return to the tradition of "never explain, never apologize", emphasizing that policy-making needs to detach from public expectation management and avoid intervening in market pricing through economic predictions and interest rate guidance. This position aligns closely with Trump's potential intention to "break the norm" by firing Powell. If Walsh takes over in May 2026, he may promote a reduction in the Federal Reserve's balance sheet size, reduce the frequency of quantitative easing tools, and strengthen constraints on fiscal deficits. Such a policy shift expectation may accelerate the reconstruction of the dollar credit system, thus affecting the pricing logic of global risk assets.
Contradictory signals in the BTC market: divergence between price and derivatives indicators
Bitcoin's weekly record shows a 12% increase, breaking through the resistance level of $95,000, but the perpetual contract funding rate remains negative, revealing a deep severance in market sentiment. From a technical perspective, BTC's price has returned above the 200-day moving average, releasing positive signals, but the 'death cross' at the daily level and the deepening negative MACD histogram indicate that bearish forces still dominate. This contradiction is even more pronounced in the derivatives market:
Leverage positions and negative feedback from funding rates: Open interest has risen to 218,000 BTC, expanding by 15.6% from the quarterly low, but the funding rate has dropped to -0.023%, the lowest level in nearly six months. This phenomenon indicates that the concentration of short positions is as high as 92% of CME's historical percentile, with professional traders constructing hedging protection through derivatives, leading to a liquidity mismatch in the spot market and widening the bid-ask spread to a three-month peak.
Whale behavior and market game: CryptoQuant data shows that a certain whale has accumulated 600 BTC through over-the-counter transactions, but during the same period, CEX platforms saw a net inflow of 1,963.99 BTC, indicating a divergence in the flow of funds between institutions and retail investors. The surge in Delta hedge demand from market makers further exacerbates volatility in the spot market, with price fluctuations exceeding 3% potentially triggering a $3.5 billion chain liquidation.
Risk Logic and Market Outlook
The current divergence between the spot and futures market of BTC exposes three layers of risk:
Asymmetry of leverage exposure and price volatility: The expansion of open interest and price rebound create "asymmetrical risk exposure"; if market sentiment shifts, the concentrated liquidation of leveraged positions may trigger a liquidity spiral.
Accumulation of short squeeze risk: Continuous negative funding rates signal an over-concentration of short positions. Historical data shows that after similar spot-futures divergence cycles, the probability of a 58% increase in volatility centrality within 30 days is as high as 79%.
Regulatory vacuum and policy resonance: The SEC's 'lava floor' regulatory attitude towards crypto businesses creates dual uncertainties with expectations of a policy shift at the Federal Reserve. Traditional institutions adopt a 'non-contact ground' circumvention strategy, but the prosperity of the derivatives market may exacerbate systemic risk accumulation.
Market strategy recommendations
Short-term traders: Pay attention to the effectiveness of the breakthrough at the $95,000 resistance level. If the price falls back to the $91,717 support level, a light long position may be attempted, but the stop-loss point should be set below $86,537 to address liquidation risks.
Arbitrage participants: Use negative funding rates to create a hedge combination of short perpetual contracts and long spot positions, with an annualized return potentially reaching 12%-35%, but be aware of inter-exchange rate differences and liquidity risks.
Long-term holders: Beware of the dollar credit system reconstruction triggered by a shift in Federal Reserve policy. If Walsh promotes balance sheet reduction and interest rate hikes after taking office, the hedging properties of BTC as "digital gold" may be weakened, necessitating dynamic adjustments in the allocation ratio between crypto assets and traditional assets.
The resonance of the power struggle over Federal Reserve policy and the structural contradictions in the crypto market is reshaping the value logic of digital assets. The short-term rebound in the BTC market cannot hide the deep risks of leverage positions and negative funding rates, while the potential policy shift of the Federal Reserve may accelerate the paradigm shift in the global monetary system. Investors need to find certainty amidst the tearing of policy games and technical formations, and beware of black swan events in a high-leverage environment.
