Bitcoin came under renewed selling pressure on Wednesday as investors shifted toward a more cautious stance following an escalation in geopolitical tensions involving the United States and Iran. At the same time, the release of the U.S. Federal Reserve's June meeting minutes reinforced concerns that interest rates could remain elevated for longer, weighing on risk-sensitive assets, including cryptocurrencies.

The world's largest cryptocurrency declined by more than 2%, trading near US$62,185 after briefly moving above US$64,600 earlier in the week. The decline reflected a broader reduction in investor appetite for higher-risk assets as global uncertainty intensified.

Bitcoin CME Futures (Source: TradingView)

Market sentiment deteriorated after military action between the United States and Iran intensified. According to media reports, the U.S. launched retaliatory strikes following attacks on commercial oil tankers near the Strait of Hormuz. Iran subsequently responded with military action, while U.S. President Donald Trump indicated that the temporary ceasefire between the two countries had effectively ended. The renewed conflict pushed energy prices sharply higher, with Brent crude briefly rising above US$80 per barrel, increasing concerns over inflation and global economic stability.

In addition to geopolitical developments, investors assessed the minutes from the Federal Reserve's June policy meeting. The minutes highlighted considerable uncertainty surrounding the inflation outlook, with policymakers discussing a range of possible scenarios. While most officials expect inflation to gradually move closer to the central bank's 2% target, several members suggested that persistent inflation driven by energy prices, artificial intelligence-related investment demand and tariff impacts could require additional monetary tightening.

The prospect of interest rates remaining higher for longer generally creates a more challenging environment for speculative investments such as cryptocurrencies, as higher bond yields and financing costs often reduce investor demand for risk assets.

Despite the short-term weakness in Bitcoin prices, institutional participation continues to provide some support. U.S.-listed spot Bitcoin exchange-traded funds (ETFs) have recently recorded several consecutive days of net inflows, reversing part of the heavy withdrawals seen during late June. While weekly flows remain mixed, renewed institutional buying suggests long-term investor interest remains intact.

Meanwhile, the U.S. Securities and Exchange Commission (SEC) may introduce a new cryptocurrency regulatory proposal, commonly referred to as "Reg Crypto," later this month. The proposal is expected to provide greater regulatory clarity and may offer exemptions or safe-harbour provisions for certain crypto-related activities. If implemented, the framework could improve fundraising opportunities for digital asset businesses while supporting broader industry development in the United States.

The broader cryptocurrency market also traded lower alongside Bitcoin. Ethereum, XRP, Solana, Cardano and Dogecoin all posted notable declines as investors reduced exposure to digital assets amid heightened geopolitical uncertainty and expectations of tighter monetary policy.

Going forward, cryptocurrency markets are likely to remain highly sensitive to developments in the Middle East, movements in oil prices, U.S. inflation data and the Federal Reserve's policy outlook. Investors may also closely monitor upcoming regulatory announcements, which could influence longer-term sentiment across the digital asset sector.

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