Bitcoin hovered around $113,000 in Asian afternoon hours on Wednesday as traders positioned themselves cautiously ahead of this week’s Federal Reserve policy decision, with dwindling liquidity and a stronger dollar weighing on sentiment in risk markets.
The world’s largest cryptocurrency continued to rise 4.5% over the past week, but fell 0.7% in the last 24 hours, reflecting modest losses in the major tokens. Ether was trading at $4,028, down 1.4%, while Solana’s SOL and Binance’s BNB each declined around 2%. XRP held slightly higher near $2.62, extending a strong seven-day streak as traders rotated into high-volume tokens.
The moves come ahead of a key Federal Open Market Committee (FOMC) meeting on October 28-29, where officials are expected to cut benchmark rates by 25 basis points to the 4.00%-4.25% range.
“The fluctuating macroeconomic backdrop is the dominant driver of this crypto cycle,” said Thomas Perfumo, Global Economist at Kraken. “A 25 basis point cut this week looks very likely, and the market is already pricing in another for December. But the Oct. 10 sell-off underscored how exposed cryptocurrencies and risk assets remain to exogenous shocks.”
Perfumo noted that the balance between institutional inflows and demand for Treasuries has shifted, dampening short-term momentum even as long-term capital remains tight.
“Treasury demand for digital assets like MicroStrategy is slowing, but ETF flows remain bullish even during drawdowns,” he said. “That resilience shows the growing presence of cryptocurrencies in traditional finance, even as short-term risk tolerance has declined since the October sell-off event.”
Beyond the Federal Reserve, traders are also watching liquidity conditions tighten. Early signs of renewed tension among US regional banks and a still uncertain global macroeconomic environment have significantly reduced market depth on centralized exchanges.
“Liquidity is tightening,” said Alice Li, a partner at Foresight Ventures. “Early signs of stress at US regional banks could push the Fed to pause QT sooner, but inflation risks keep policymakers cautious. BTC extended its drawdown and altcoins sold off broadly as CEX order book liquidity fell to around 40% of pre-crash levels.”
BNB-led names dominated relatively outperformance as exchange-linked tokens stabilized after weeks of deleveraging, while speculative altcoins remained “PVP: fleeting, event-driven and low-conviction,” Li added.
Despite the dovish tone, some analysts say crypto markets are stabilizing after the Oct. 10 surge that saw nearly $1.2 billion in leveraged positions wiped out. Total cryptocurrency capitalization stands at around $3.9 trillion, comfortably above key moving averages, even as sentiment remains fragile.
FxPro analyst Alex Kuptsikevich noted that bitcoin’s technical setup is still leaning towards constructive: “BTC remains above its 50-day and 200-day moving averages. The $117,000 to $120,000 area is a strong resistance zone, but the rebound from the $108,000 support keeps the bullish structure intact.”
As liquidity tightens and leveraged positioning rebuilds, volatility may increase around Wednesday’s Fed announcement, especially if Powell’s tone signals slower easing.
