Bitcoin prices edged lower on Wednesday as growing expectations of further U.S. Federal Reserve interest rate hikes and uncertainty over the country’s cryptocurrency regulatory outlook weighed on investor sentiment.
Bitcoin was down 0.20 percent at $73,718 as of 1:34 GMT, extending its recent losses amid expectations that the Fed could raise borrowing costs in December to curb persistent inflation.
Expectations of a December Fed rate hike rise
The world’s largest cryptocurrency had earlier fallen to a three-month low, pressured by a stronger U.S. dollar and rising bond yields. Continued outflows from spot Bitcoin exchange-traded funds (ETFs) also added to the downward pressure.
Expectations of a December rate hike strengthened following hotter-than-expected U.S. consumer price inflation data for October, alongside hawkish comments from two Federal Reserve officials who called for higher interest rates to contain inflation.
According to the CME FedWatch tool, markets were pricing in an almost 89 percent probability of a 25-basis-point rate increase in December, with a lower possibility of a larger 50-basis-point hike.
Higher interest rates typically weigh on speculative assets such as cryptocurrencies by increasing the opportunity cost of holding investments that do not generate interest. Bitcoin has historically struggled in high-rate environments, including during the Fed’s monetary tightening cycle in 2022 and 2023.
Read: Bitcoin rises 1.34 percent to $74,739 as $201 million ETF outflow limits crypto rebound
U.S. political uncertainty adds to crypto market pressure
The prospect of tighter monetary policy has added to pressure on Bitcoin, which has also faced losses following the Democrats’ victories in both chambers of Congress in the U.S. midterm elections.
The election outcome has raised concerns among investors about the possibility of increased regulatory scrutiny of the cryptocurrency industry, as Democrats have historically advocated stricter anti-money laundering requirements and stronger risk management standards.
Broader cryptocurrency markets also traded lower on Wednesday. Ether, the world’s second-largest cryptocurrency, fell 0.49 percent to $2,056.62, while XRP declined 0.40 percent to $1.0603.
In contrast, Solana and Cardano gained 0.58 percent and 0.80 percent, respectively, while BNB lost 0.23 percent.
Among memecoins, Dogecoin declined 0.81 percent, while $TRUMP gained 2.18 percent.
