Is Bitcoin the ultimate hedge as U.S. monetary power consolidates?

While Japan faces a debt spiral, the United States is experiencing a different but equally consequential shift: an unprecedented consolidation of monetary power. Polymarket prediction markets now assign a 39% probability that Kevin Hassett, who currently serves as Director of the National Economic Council, will become the next Federal Reserve Chair. The runner-up, Kevin Warsh, now stands at 37%.

President Trump has already hinted at his choice, and Treasury Secretary Scott Bessent has suggested that an official announcement could come before Christmas.

Trump–Hassett monetary power consolidation

The proposed new structure is extraordinary. Reports indicate that Bessent could remain Treasury Secretary while also leading the NEC, with Hassett heading the Fed. Fiscal, monetary and tax policy could become closely coordinated under a single leadership axis. 

One person (Bessent) would wield effective influence over interest rate policy, debt financing, taxation, federal budgeting and monetary strategy. Such centralization of power has not been seen since Nixon ended dollar convertibility to gold, and the bond markets are noticing.

During Treasury consultations in November 2025, bond investors and asset managers raised alarms about inflation credibility. Analysts drew parallels to the Nixon-Burns era, when political pressure kept rates artificially low, ultimately driving inflation to 12%, which ended with the Volcker shock.

Hassett’s public statements have heightened market concern. He has suggested that ‘inflation has come way down’, even as CPI rose for five consecutive months, questioned the neutrality of BLS jobs data, and promised ‘cheaper car loans and easier mortgages’. Markets interpret this as signaling politically engineered rate cuts. Even if short-term rates are reduced, long-term borrowing costs may rise in response, the opposite of the intended effect.

Adding to the uncertainty, the U.S. Treasury recently announced a $12.5 billion buyback program, the largest in history. While framed as routine liquidity management, investors suspect it may be preparation for potential sovereign market stress, global liquidity shortages or spillovers from Japan’s crisis. 

This shift may be behind Bitcoin’s recent recovery. If the Fed becomes politicized, credibility erodes. Markets will price in future inflation, negative real rates, fiscal dominance and soft-money policy. All of these strengthen Bitcoin’s case as a hedge, not just against inflation, but against institutional failure itself.

And a politicized Fed may see more rate cuts, which have historically been good news for crypto. 

Japan’s debt spiral worsens

Meanwhile, Japan’s economic crisis is unfolding in real time. The Japanese government has approved a $135 billion stimulus package to support households, while the Bank of Japan signaled upcoming rate hikes to combat inflation. These two policies, fiscal expansion and monetary tightening, directly contradict one another.

The consequences have been severe. Thirty-year Japanese government bond (JGB) yields have soared.

Japan’s predicament is not simply about debt, but a structural contradiction: it must raise rates to fight inflation yet cannot afford higher rates due to its debt. 

The resulting doom loop is brutal; Japan prints money to service its debt, which fuels inflation, which pushes interest rates higher, making debt harder to service. Japan then prints more money, and the cycle repeats.

The Bank of Japan’s balance sheet is under unprecedented stress. It holds ¥83.2 trillion in equity ETFs, ¥46 trillion in unrealized stock gains, and ¥32.8 trillion in unrealized bond losses. Tightening policy could wipe out stock gains and accelerate bond losses; inaction would fuel inflation and depreciate the yen. Meanwhile, the BOJ’s planned pace of ETF liquidation, of some ¥330 billion per year, would take 252 years to unwind its holdings. 

Japan’s crisis signals the fragility of all debt systems built on artificially low rates. Central banks cannot normalize without market disruption, debt burdens are unsustainable and printing money is the only politically feasible path. Bitcoin thrives this environment, reinforcing a narrative that programmed monetary policy is superior to discretionary policy.

Bitcoin as the rational response to monetary instability

Bitcoin’s recovery appears to be a rational response to global monetary instability.

First, it protects against financial repression, a regime where rates are kept below inflation to erode debt, as seen in the U.S. during the 1940s and 1950s. Second, Bitcoin offers programmed scarcity; only 21 million BTC will ever exist, immune to political or economic interference. 

Third, Bitcoin has become institutional-grade, with liquidity, custody, ETFs and regulatory clarity enabling substantial capital flows. It also hedges against sovereign fragility. Japan’s crisis is a warning for any high-debt, low-growth economy struggling with rate normalization. 

Bitcoin offers neutrality that sovereign financial systems cannot. Trust in central banks, political independence, inflation statistics and debt sustainability is declining, while Bitcoin is thriving precisely because it operates without trust. 

Finally, it provides optionality. In uncertain macro conditions, asymmetric assets like Bitcoin may help to protect against extreme outcomes.

In a declining trust environment, trustless assets are gaining ground.

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