Bitcoin declined 4% during U.S. trading before stabilizing near $75,900 at 8 a.m. London time. The move lower came after a key U.S. crypto regulation bill failed to advance, while traders were also preparing for a potentially higher Federal Reserve interest rate.

The regulatory setback and the changing outlook for U.S. monetary policy have become important parts of the market backdrop. The broader cryptocurrency market also moved lower following the sharp losses recorded during the U.S. session.

The immediate regulatory concern involved the Clarity Act. Reuters reported ahead of the vote that the Senate was preparing to hold a procedural vote on the legislation, an important step that could influence its future. The bill aims to clarify whether certain crypto tokens should fall under securities or commodities rules, Reuters reported.

The legislative setback came as investors were already focused on the possibility of tighter monetary policy. Bloomberg reported that disappointment over the bill weighed on crypto sentiment shortly before the Fed’s expected decision. The combination provided the backdrop for Bitcoin’s U.S.-session decline and the weakness across other digital assets.

On Sept. 14, Reuters reported that traders saw an 85% chance of a rate hike on Wednesday following stronger inflation figures. That probability reflected market pricing at the time and was not a fixed forecast.

Understanding the Fed Rate-Hike Odds

Market-based rate probabilities can change rapidly when new economic data or policy signals emerge. CME FedWatch derives its estimates for potential changes to the Federal Reserve’s target rate from prices on 30-Day Fed Funds futures, providing an indication of how traders are positioning ahead of policy meetings.

The available reports point to elevated expectations for a Fed increase, but they do not establish a direct causal relationship between the rate outlook and Bitcoin’s 4% decline. The cryptocurrency was instead trading amid two notable developments: expectations for tighter monetary policy and the failure to advance the U.S. crypto bill.

Reuters also reported that persistent inflation had increased expectations for a rate hike, while longer-dated Treasury yields were approaching 5%. Higher yields can draw capital toward traditional fixed-income markets, while rising borrowing costs can create additional pressure for speculative assets such as Bitcoin.

Fed Decision Could Set the Next Direction

The Federal Reserve’s policy announcement is now the next major scheduled event for markets. The decision will come after Bitcoin’s late-August rebound and could influence how traders assess the cryptocurrency’s recent recovery. Bloomberg likewise highlighted the potential Fed hike as a near-term source of pressure for digital assets.

The regulatory issue remains separate from the monetary-policy outlook. The unsuccessful effort to advance the Clarity Act leaves the legislation’s next steps uncertain, while the Fed decision will provide fresh guidance on U.S. interest rates.

Bitcoin was trading near $75,900 at 8 a.m. in London after finding some stability following the U.S. sell-off. The wider crypto market remained weaker after the steep declines seen during the U.S. session.