Bitcoin Plummets as Senate Blocks Crypto Bill and Fed Hikes Rates

The Federal Reserve System raised interest rates by 25 basis points on Wednesday, increasing the benchmark range to 3.75% to 4.00%. This first hike in over three years, driven by persistent inflation, coincided with a sharp decline in Bitcoin, which is now trading approximately 40% below its October high of $126,000.

Market volatility intensified after the United States Senate failed to invoke cloture on the Digital Asset Market Clarity Act in a 49-50 vote. The legislation sought to establish a federal regulatory framework by splitting oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission. Opponents of the bill cited concerns over banking competition and potential conflicts of interest involving President Donald Trump and his family's assets.

Following the legislative defeat, U.S. spot Bitcoin ETFs saw their largest single-day outflow since June 24, losing $450.4 million. Fidelity's FBTC and BlackRock's IBIT led the exodus, contributing to a combined loss of nearly $593 million across Bitcoin, Ethereum, and XRP funds. Bitcoin prices dropped below $76,000, touching $74,984, while over $115 million in cryptocurrency liquidations occurred.

Political reactions were stark. Senator Elizabeth Warren opposed the bill, warning of a "crypto-fueled economic crash," while lead negotiator Senator Cynthia Lummis characterized the failure as a "death sentence" for the legislation. Additional macroeconomic pressure mounted as the U.S. 10-year Treasury yield climbed above 5% and crude oil prices rose above $100 a barrel due to Middle East tensions.