Bitcoin hovered near $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 across risk markets.
The world’s largest cryptocurrency is up 4.5% over the past week, but fell 0.7% in the past 24 hours, reflecting modest losses across major tokens. Ether traded 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 run as traders rotated into high-volume tokens.
The measures come ahead of a key meeting of the Federal Open Market Committee (FOMC) on 28-29 October, when officials are generally expected to cut benchmark interest rates by 25 basis points to a range of 4.00%-4.25%.
“The fluctuating macroeconomic backdrop is the dominant driver of this crypto cycle,” said Thomas Perfumo, global economist at Kraken. “A 25bps cut this week seems very likely, and the market is already pricing in another in December. But the October 10 selloff underscored how exposed crypto and risk assets remain to exogenous shocks.”
Perfumo noted that the balance between institutional inflows and demand for Treasuries has shifted, dampening near-term momentum even as long-term capital remains sticky.
“Demand from government bonds with digital assets like MicroStrategy is slowing, but ETF flows continue to skew bullish, even during drawdowns,” he said. “This resilience demonstrates crypto’s growing foothold with traditional finance, even as short-term risk tolerance has declined since the liquidation event in October.”
In addition to the Fed, traders are also looking at tight liquidity conditions. Early signs of renewed stress among US regional banks and a still uncertain global macro environment have left market depth markedly lower across centralized exchanges.
“Liquidity is tightening,” said Alice Li, partner at Foresight Ventures. “Early signs of US regional bank stress could push the Fed to pause QT sooner, but inflation risks keep policymakers cautious. BTC extended its traction and altcoins sold broadly as CEX order book liquidity fell to around 40% of pre-decline levels.”
BNB-led names dominated the relative outperformance as exchange-linked tokens stabilized after weeks of deleveraging, while speculative altcoins remained “PVP – volatile, event-driven and low conviction,” Li added.
Despite the subdued tone, some analysts say crypto markets are stabilizing after the Oct. 10 flush that wiped out nearly $1.2 billion in leveraged positions. Total crypto capitalization is around $3.9 trillion, comfortably above the main moving averages, even as sentiment remains fragile.
FxPro analyst Alex Kuptsikevich noted that bitcoin’s technical setup is still leaning constructive: “BTC remains above both its 50-day and 200-day moving averages. The $117K-$120K area is a strong resistance zone, but the pullback from the $108K support keeps the bull structure intact.”
As liquidity tightens and leveraged positioning rebuilds, volatility could rise around Wednesday’s Fed announcement — especially if Powell’s tone signals slower easing.
