Bitcoin edges lower after strong monthly gains in August

The crypto dropped 0.2% to $77,132.6, after rallying nearly 25% in August

Bitcoin edged lower on Wednesday, extending losses after logging strong monthly gains in August as renewed Iran-U.S. fighting and persistent uncertainty over interest rates weighed on risk-driven assets.

The crypto dropped 0.2% to $77,132.6 by 22:07 GMT, after rallying nearly 25% in August.

But this rally came to a halt in September as crypto markets were spooked by a resurgence in Treasury yields, while renewed Iran-U.S. action also dented risk appetite.

Renewed buying action by top corporate holder Strategy offered limited support to Bitcoin, even as the company marked its first Bitcoin purchase in two months.

Iran and U.S. traded a new round of strikes overnight on Tuesday, as the countries remained at odds over the Strait of Hormuz.

Both sides signalled little intent to deescalate as Tehran warned of more attacks on U.S. bases in Gulf countries, while U.S. president threatened to attack Iran’s oil infrastructure.

Oil prices rose sharply on the renewed fighting, which marked the worst U.S.-Iran hostilities in over a month.

Higher oil in turn factored into concerns over surging energy-driven inflation across the globe. Government bond yields across Japan, Australia, the U.S. and Europe surged on this notion, further pressuring risk-driven assets.

Markets were seen rapidly increasing bets that the U.S. central bank will hike interest rates in September, especially as inflation remains well above the bank’s 2% annual target.

Higher rates bode poorly for purely speculative assets such as Bitcoin. The crypto’s August rally was fuelled chiefly by a drop in yields.

Focus this week is squarely on U.S. nonfarm payrolls data, due Friday, for more cues on rates. Any signs of resilience in the labour market give the central bank more headroom to hike.