Bitcoin rose above $79,000 on Wednesday following a drop in the previous session,
as renewed interest in crypto exchange-traded products provided some support, even though concerns about a potential Federal Reserve interest rate hike and rising oil prices dampened risk appetite.
The world's largest cryptocurrency was last trading 0.8% higher at $79,491.2 as of 12:34.
On Tuesday, it fell to lows near $77,600. Last week, the cryptocurrency climbed above $82,000 but subsequently gave up those gains following the release of stronger-than-expected U.S. employment data.
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The broader cryptocurrency market also saw a sharp rise in Zcash, with assets in Grayscale's Zcash ETF surpassing $500 million roughly two weeks after its August 25 debut on NYSE Arca.
The Grayscale fund is the first exchange-traded product to offer spot exposure to Zcash, expanding institutional access to the token.
Risks of Fed rate hikes persist; oil prices climb toward $100 per barrel.
However, Bitcoin's gains remained capped as macroeconomic risks weighed on the market.
Traders sharply increased bets that the Fed might raise interest rates at its September 15–16 meeting following stronger-than-expected U.S. employment data and renewed inflation concerns.
On Monday, UBS forecast two 25-basis-point Fed rate hikes this year—in September and December—while markets priced in a roughly 58% probability of a September hike. High oil prices have compounded these concerns. Brent crude rose to $99.68 per barrel on Wednesday—its highest level since late June—as escalating tensions in the Middle East heightened fears of broader disruptions to energy supplies.
The surge in oil prices has complicated the outlook for central banks, raising the likelihood of a resurgence in inflation just as policymakers assess whether economic conditions warrant tighter policy.
US producer price data is due on Thursday, followed by consumer price figures on Friday, making inflation data critical to expectations regarding the Federal Reserve's next move.
For Bitcoin, higher interest rates are likely to weigh on demand for risk-sensitive assets, boosting the relative appeal of yield-bearing investments. This dynamic is keeping the cryptocurrency below its recent highs, despite ongoing interest in crypto ETFs.