Bitcoin was trading at a near four-week low Wednesday as investors await the Federal Reserve's interest-rate decision later in the day, after the digital currency fell Tuesday following the U.S. Senate's rejection of a crypto-friendly bill.

Bitcoin traded at $75,491 in early European trading, after falling around 4% a day earlier to as low as $75,026.

A Fed rate hike could further weigh on cryptocurrencies. Signs of a sustained tightening cycle would keep crypto competing with real yields for capital, analysts said. But if the Fed signals limited further tightening, Treasury yields and the U.S. dollar could ease, improving sentiment for crypto, they added.

"One hike and a pause should let prices steady," said Yusuf Fakhro, partner at ARP Digital. "A path of further hikes while inflation is still above target would be a harder setup for BTC and ETH, and harder still for smaller tokens and crypto stocks."

Investors are looking for a catalyst after the Senate blocked Trump-backed legislation that would have established an industry-friendly regulatory framework for cryptocurrencies and digital assets. The long-anticipated Clarity Act was defeated in a 49-50 decision on Tuesday--short of the 60 votes it needed to be advanced to a formal floor vote, killing the bill's chances of getting passed ahead of November's midterm elections.

The loss puts pressure on crypto prices after a rally this past summer, driven in part by optimism around the bill along with currency devaluation fears. Bitcoin rose around 25% between Aug. 19 and Aug. 25, and climbed above $82,000 at the start of September before pulling back. If bitcoin drops below $75,000, it could fall further toward $69,000-$70,000, according to eToro's Javier Molina.

Bitcoin holding at $75,000-$76,000 despite 5% Treasury yields and the legislative setback signals underlying demand, said Naeem Aslam of Zaye Capital Markets. However, a stronger recovery will require either clearer regulation, softer financial conditions, or both, he added.