Bitcoin steadies as markets assess the Fed's stance and escalating US-Iran tensions

Bitcoin traded little changed on Thursday, holding near the $64,000 level after staging a modest recovery earlier this week.

Fresh inflows into US spot Bitcoin exchange-traded funds (Spot Bitcoin ETFs) have provided some support for the cryptocurrency. However, analysts warn that renewed inflation concerns, the Federal Reserve's hawkish tone, and escalating tensions between the United States and Iran continue to limit the scope for further gains.

Fed and geopolitical tensions weigh on sentiment

The Federal Reserve left its benchmark interest rate unchanged at 3.50%-3.75% on Wednesday, marking its fifth consecutive meeting without a policy change, in line with market expectations.

However, three members of the Federal Open Market Committee dissented in favor of a 25-basis-point rate hike, signaling growing concern within the central bank over persistent inflationary pressures.

Federal Reserve Chair Kevin Warsh also struck a hawkish tone during his post-meeting press conference, boosting the US dollar and reducing investor appetite for riskier assets, including cryptocurrencies.

Markets continue to price in the possibility of further monetary tightening as inflation risks increase amid escalating tensions in the Middle East.

War pushes oil higher and pressures risk assets

The conflict between the United States and Iran continues to fuel volatility in oil markets, with concerns mounting over potential disruptions to energy supplies through key maritime chokepoints, including the Strait of Hormuz and the Bab al-Mandab Strait.

The United States carried out strikes on targets inside Iran in response to Iranian missile attacks against US forces in the Middle East. At the same time, US and Saudi forces conducted joint operations against Iran-backed groups in Iraq, raising the risk of a broader regional conflict.

Meanwhile, reports indicated that Yemen's Iran-backed Houthi movement is considering imposing fees on commercial vessels transiting the southern Red Sea.

These developments have pushed oil prices higher once again, reviving inflation concerns and reducing demand for higher-risk assets, limiting Bitcoin's upside momentum.

Modest improvement in institutional demand

On the positive side, data from SoSoValue showed a modest improvement in institutional demand.

US-listed spot Bitcoin ETFs recorded net inflows of $32.11 million on Wednesday, ending a four-day streak of net outflows.

Analysts believe that if these inflows continue to build over the coming days, they could support a broader recovery in Bitcoin and help the cryptocurrency resume its upward trend.