Bitcoin hovered near $113,000 Wednesday afternoon in Asia, as traders positioned cautiously ahead of this week’s Federal Reserve policy decision, with dwindling liquidity and a stronger dollar weighing on risk-on market sentiment.
The world’s largest cryptocurrency remained up 4.5% over the past week, but slipped 0.7% over the past 24 hours, reflecting modest losses in major tokens. Ether was trading at $4,028, down 1.4%, while Solana’s SOL and Binance’s BNB each fell around 2%. XRP held slightly higher near $2.62, extending a strong seven-day stretch as traders shifted to high-volume tokens.
The moves come ahead of a crucial meeting of the Federal Open Market Committee (FOMC) on Oct. 28-29, where officials are expected to cut benchmark rates by 25 basis points to the 4.00% to 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 drop this week seems highly likely, and the market is already pricing in another one by December. But the October 10 sell-off highlighted how crypto and risk assets remain exposed to exogenous shocks.”
Perfumo noted that the balance between institutional flows and cash demand has shifted, tempering short-term dynamics even as long-term capital remains sticky.
“Demand from digital asset treasures like MicroStrategy is slowing, but ETF flows continue to be bullish, even during drawdowns,” he said. “This resilience shows crypto’s growing entrenchment in traditional finance, even as short-term risk tolerance has diminished since the October sell-off.”
Beyond the Fed, traders are also watching tightening liquidity conditions. Early signs of renewed stress among U.S. regional banks and a still-uncertain global macroeconomic environment have left market depth significantly lower on centralized exchanges.
“Liquidity is tightening,” said Alice Li, a partner at Foresight Ventures. “Early signs of strain on U.S. regional banks could push the Fed to suspend QT sooner, but inflation risks are keeping policymakers cautious. BTC extended its pullback and altcoins sold off broadly as liquidity in the CEX order book fell to around 40% of pre-drop levels.”
Names led by BNB led the relative outperformance as exchange-linked tokens stabilized after weeks of deleveraging, while speculative altcoins remained “PVP – ephemeral, event-driven and low-conviction,” Li added.
Despite the subdued tone, some analysts say crypto markets are stabilizing after the October 10 wave that saw nearly $1.2 billion in leveraged positions wiped out. The total capitalization of cryptocurrencies stands at around $3.9 trillion, comfortably above the major moving averages, although sentiment remains fragile.
FxPro analyst Alex Kuptsikevich noted that Bitcoin’s technical setup remains constructive: “BTC remains above its 50-day and 200-day moving averages. The $117,000-$120,000 area is a strong resistance zone, but the rebound from $108,000 support keeps the bullish structure intact.”
As liquidity tightens and leveraged positioning recovers, volatility could increase around the Fed’s announcement on Wednesday – especially if Powell’s tone signals slower easing.
