Bitcoin falls ahead of debt ceiling vote, heads for its first losing month of the year

Bitcoin fell on Wednesday and was on track to post a down month as optimism around the debt ceiling rally fizzled.

The crypto market leader lost 3% and was trading at $26,879.49, according to Coin Metrics. Ether slipped more than 2% to $1,855.55.

Both cryptocurrencies were heading for their first losing month in 2023. Bitcoin is track to post a 8% loss, which would be its worst month since November 2022. Ether is down 2.5% this month. If it ends the day in the red, that will make May its worst month since December 2022.

Bitcoin (BTC) in May

Crypto moved in line with the major stock averages, which were all lower as investors awaited the House vote on the tentative deal to raise the nation's debt ceiling and avoid a default on Wednesday.

"Avoiding a default is a relief, for sure, but the incoming wave of issuance will withdraw liquidity from the market and push yields up," said Noelle Acheson, economist and author of the "Crypto is Macro Now" newsletter.

"In theory, this should be the equivalent of another rate hike at least – but the CME swaps market is pricing in another rate hike in June on top of the liquidity impact, with expectations of a cut pushed out to November at the earliest," she added.

Crypto prices initially climbed over the weekend after House Republicans reached a tentative deal with the White House to address the debt ceiling. On Monday bitcoin and ether climbed as high as $28,461.45 and $1,928.16, respectively, but began pulling back Tuesday.

Bitcoin and ether are still up 62% and 54%, respectively, for the year.

—CNBC's Gina Francolla contributed reporting