Bitcoin fell to about $26,500 on Thursday, reversing earlier weekly gains, as investors reacted to the Federal Reserve signaling interest rates will remain elevated for longer than previously expected.

The flagship cryptocurrency declined 2.3%, erasing an advance earlier this week to over $27,000. The drop came a day after the Fed raised its projection for interest rates through 2025, denting hopes for a pivot toward more accommodative monetary policy.

According to Didar Bekbauov, founder of bitcoin mining firm Xive, the Fed's stagnant outlook on rates could bolster Bitcoin over the long run by making traditional assets less enticing for institutional investors. However, the immediate reaction was a broad slump in crypto prices and related equities.

The overall crypto market shed about 2% to stand at $1.05 trillion, based on CoinMarketCap data. Stocks such as MicroStrategy, Coinbase Global, Riot Platforms and Marathon Digital were also under pressure amid the risk-off mood.

Major alternative coins including Ether tracked the decline in Bitcoin, which has struggled to break out of the $25,000 to $30,000 range amid low trading volumes and muted volatility. Some analysts argue Bitcoin needs a catalyst like ETF approval or shifts in the macro backdrop to stage a renewed rally.

At the same time, the crypto sector faces headwinds from layoffs at Binance, the largest digital asset exchange, and heightened regulatory scrutiny after the SEC sued Binance and its founder. The confluence of factors could keep weighing on prices barring a change in market conditions.