Bitcoin reversed a large portion of recent gains on Thursday as markets reacted to hawkish signals from the Federal Reserve, with traders increasing the probability of at least one rate rise before the end of 2026. By 01:31 ET (05:31 GMT), Bitcoin had declined 2.8% to $63,964.6.
The downward pressure on the leading cryptocurrency intensified after the Fed's meeting, which left interest rates unchanged as widely expected, produced language and signals that suggested more policymakers are open to raising rates later in 2026 amid concerns over persistent inflation. New Fed Chair Kevin Warsh also indicated plans to change how the central bank communicates its interest-rate outlook, introducing another layer of uncertainty to markets.
Market measures showed investors pricing in at least one 25 basis point tightening by the end of 2026, according to CME FedWatch. Higher-for-longer interest-rate expectations typically reduce the attractiveness of speculative, risk-on assets, such as cryptocurrencies, because the relative appeal of safer fixed-income returns increases.
In parallel, reports on Wednesday evening indicated that the U.S. and Iran had electronically signed a memorandum of understanding intended to end active hostilities and to reopen crucial Middle Eastern shipping lanes. The framework agreement is structured to lead into further negotiations aimed at a comprehensive peace deal, with Iran's nuclear program identified as a central issue in upcoming discussions.
Although the diplomatic development produced a risk-on impulse for some markets, flows favored equities tied to artificial intelligence and chipmaking companies, which market participants view as having more resilient fundamentals. That preference for quality technology exposure over more speculative instruments has coincided with sustained outflows from crypto, notably from spot exchange-traded funds focused on digital assets.
Crypto markets broadly retreated in step with Bitcoin, and did not materially benefit from the U.S.-Iran announcement. Ether, the second-largest token by market value, declined 3.6% to $1,729.19. XRP lost 4.3%.
Other major tokens also moved lower, with Solana, Cardano and BNB each sliding in the 3% to 5% range. Memecoins followed the broader downtrend: Dogecoin fell 3.5%, and the token denoted as $TRUMP dropped 2.9%.
Overall, short-term market dynamics were driven by a combination of tighter rate expectations and a rotation of investor risk preferences toward AI and semiconductor stocks, leaving cryptocurrencies as a less favored option for capital allocation in the immediate aftermath of both the Fed meeting and the geopolitical development.