Bitcoin Strength Under Question As DOJ Fed Probe Looms

Key takeaways:

• Institutional investors selling Bitcoin is visible through the Bitcoin ETFs recording $1.38 billion in net outflows across four trading sessions. 

• BTC futures data shows a neutral 5% basis rate, well below the 10% level that typically defines a true bullish breakout.

Bitcoin (BTC) briefly rallied above $92,000 after reports of a DOJ investigation into Federal Reserve Chair Jerome Powell, though traders remain cautious amid ETF outflows. Despite the odd outcome, Bitcoin traders remain skeptical due to exchange-traded fund outflows and weak demand for bullish leveraged BTC positions.

Despite the recent rebound, Bitcoin is still down 23% since October 2025, while gold and silver reached all-time highs in 2026. This divergence has led traders to question whether the digital store-of-value narrative is losing strength. As a result, even if Bitcoin rallies another 14% toward $105,000, investors may hesitate to turn bullish, particularly as analysts grow less confident that the US will deliver further economic stimulus in the near term.

Goldman Sachs no longer expects an interest rate cut in March, citing sticky inflation and resilient labor market data despite temporary slowdowns. US President Donald Trump has openly criticized the Fed for keeping interest rates elevated, even as inflation remained above the 2% target throughout the second half of 2025. Powell’s time as Fed chair ends in April, opening the door for a successor potentially more inclined toward looser monetary policy.

Powell is being investigated over the Fed’s building renovation project, prompting analysts to question whether central bank independence could be at risk—a scenario that could favor alternative scarce assets such as Bitcoin. Powell said the action should be viewed within the broader context of the Trump administration’s threats. 

Bitcoin fails to hold $94,000 despite major corporate buying

Even as Bitcoin reclaimed $91,000 on Monday, traders showed little interest in turning bullish, according to BTC derivatives data.

Bitcoin’s risk profile appears largely unchanged by the power struggle between the Fed and the Trump administration, as the BTC futures annualized premium, or basis rate, remained near a neutral-to-bearish 5%. Periods of bullish sentiment are typically characterized by BTC futures trading at a 10% premium or more relative to spot markets.

More importantly, Bitcoin spot ETFs recorded $1.38 billion in net outflows across four consecutive trading days. Even more concerning, Bitcoin has been unable to sustain levels above $94,000 over the past month, despite Strategy (MSTR US) adding $1.25 billion worth of BTC. The company led by Michael Saylor announced on Monday its largest Bitcoin purchase since July 2025.

Related: Bitcoin to hit $2.9M by 2050 as it muscles into global trade–VanEck

While Bitcoin may function as an alternative hedge to the traditional financial system, there is little evidence that a confidence crisis in the US dollar is unfolding. Despite the $601 billion fiscal deficit recorded in the final three months of 2025, the US government debt has retained its investment-grade status. Meanwhile, yields on the 5-year Treasury have remained below 3.8% over the past couple of months.

If traders were bracing for an imminent economic downturn, the US dollar would likely have weakened against a basket of foreign currencies, as measured by the DXY index. Instead, the US Dollar Strength Index rebounded to 99 from a 96.7 low in late November 2025. As a result, there is currently no clear evidence of a debasement trade, despite the strong rally in precious metals.

Ultimately, the appeal of Bitcoin and cryptocurrencies remains subdued, as reflected in ETF flows and muted demand for leveraged BTC positions, suggesting relatively low odds of a surprise rally toward $105,000 in the near term.

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