Bitcoin falls to $83k amid pressure from Fed minutes, oil prices, and yields

Bitcoin experienced a decline on Wednesday following the latest Federal Reserve minutes, which indicated that most policymakers anticipated another interest rate increase in 2023. In addition, risk sentiment was dampened by elevated yields and oil prices. The largest cryptocurrency lost 2.8% to reach $83,198.50 by 17:46 ET (21:46 GMT), having traded within a narrow range throughout October after a strong performance in the third quarter.

Similar declines were observed in broader crypto prices, as there was little enthusiasm for increased U.S. crypto-friendly regulation. Investors' interest in cryptocurrencies has been overshadowed by the soaring performance of artificial intelligence stocks on Wall Street. Following the Federal Open Market Committee's (FOMC) September monetary policy meeting, market participants were closely monitoring the minutes, which revealed that the majority of FOMC members expected another rate hike by the year's end.

The previous meeting had unanimously approved a 25 basis point increase in the federal funds rate, the first rise in over three years. Furthermore, the FOMC dot plot suggested additional rate hikes throughout the year, while FOMC Chair Kevin Warsh stated during a press conference that reducing inflation to the central bank's 2% target remained a major challenge.

The FOMC minutes also indicated that all participants had backed rate hikes in September. Generally, higher interest rate environments tend to negatively impact speculative assets like cryptocurrencies. The minutes were released at a time when the likelihood of another FOMC rate hike later in the month had dropped significantly, due to recent dovish remarks from policymakers and data indicating U.S. economic growth, inflation, and labor market trends.

The CME FedWatch tool reported an 83% probability of the FOMC maintaining the target rate steady later this month, down from around 54% a month earlier. Additionally, a resurgence in the U.S. bond market rout and higher oil prices put further pressure on Bitcoin. The bond sell-off eased by the afternoon following a $39 billion 10-year Treasury note auction that achieved its highest yield for such an auction since November 2000, signaling strong demand for government debt and helping to temper U.S. yield gains.

Oil prices fluctuated throughout the day, starting with a 0.6% rise in benchmark Brent crude futures to $101.17 a barrel, initially driven by concerns over supply disruptions due to increased attacks on ships in the Strait of Hormuz and the ongoing fighting between Iran-backed Houthis and the Saudi Arabia-backed government in Yemen.

However, the upward momentum was curbed after the International Energy Agency pledged to expedite the release of oil stocks and prioritize diesel to counter the price surge. France likewise committed to releasing 10 million barrels of diesel from its emergency reserves. Meanwhile, crypto exchange OKX announced a strategic investment from Circle, Qube Research, Ripple, and Standard Chartered, with a pre-money valuation of $25 billion and no specific investment amount disclosed.

The exchange also stated that the round strengthened its ties with key financial infrastructure developers. Robinhood also invested $25 million in Bitcoin to bolster its commitment to the crypto sector.