Bitcoin fell Wednesday to cap its first down month of the year as optimism around the debt ceiling rally fizzled.

The crypto market leader lost 2.77% to trade at $27,057.81, according to Coin Metrics. Ether slipped 2.2% to $1,865.82.

Both cryptocurrencies posted their first losing months in 2023. Bitcoin ended the month down 7.9%, making it its worst month since November 2022. Ether lost about 2.05% in May, its worst month since December 2022.

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

"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 63% and 55%, respectively, for the year.

— CNBC's Gina Francolla contributed reporting.