Bitcoin hit its lowest in a month as outflows from digital asset investment products and the prospect of higher U.S. borrowing costs for a longer period weakened cryptocurrency markets.

On Tuesday, BTC, the largest digital asset, fell as much as 2.7% to levels not seen since mid-May before paring losses to trade at $65,740 at 1:20 pm Singapore time. Smaller coins such as Ethereum, Solana and Dogecoin also fell.

Data from CoinShares International Ltd. showed about $600 million in withdrawals from digital asset products last week, the highest level since March. Persistent inflation has led traders to lower expectations for the Federal Reserve to cut interest rates this year, posing a challenge to speculative investments such as cryptocurrencies.

Stocks and bonds returned higher than Bitcoin during the quarter, a reversal from the three months to March, when the digital asset significantly outperformed traditional markets.

“Cryptocurrencies are increasingly vulnerable to macro triggers,” said Caroline Bowler, CEO of BTC Markets Pty, while adding that she remained optimistic about the long-term outlook.

Crypto market demand weakens

Cryptocurrency markets, including new coins, are showing signs of weakening demand. The ZK token launched by a highly touted Ethereum L2 project fell by a third after listing on Monday, the latest in a series of highly anticipated tokens that have suffered heavy sell-offs.

In South Korea, a local report said that new regulations coming next month may force exchanges to reduce the number of tokens available to investors. The country is an engine of demand for smaller digital assets, so-called altcoins, and the report may have spooked some traders.

Bitcoin prices have quadrupled since the start of 2023, hitting an all-time high of $73,798 in March, helped by demand for U.S.-specific exchange-traded funds. The rally has cooled recently as ETF inflows have slowed.