Bitcoin hovered around $113,000 in the Asian afternoon on Wednesday, as weak liquidity and a strong dollar weighed on sentiment across risk markets and traders remained cautious ahead of this week’s U.S. Federal Reserve policy decision.
The world’s largest cryptocurrency continued to rise 4.5% over the past week, but fell 0.7% in the past 24 hours, reflecting modest losses across major tokens. ether traded 1.4% lower at $4,028, while Solana’s SOL and Binance’s BNB each fell about 2%. XRP rose slightly around $2.62, extending a seven-day strong trading day as traders switched to the token in large quantities.
The move comes ahead of a key Federal Open Market Committee (FOMC) meeting on Oct. 28-29, where officials are widely expected to cut the benchmark interest rate by 25 basis points to a range of 4.00% to 4.25%.
“The volatile macroeconomic backdrop is the main driver of this crypto cycle,” said Thomas Perfumo, global economist at Kraken. “A 25bps rate cut this week is very likely, and the market is already pricing in further rate cuts through December. However, the October 10 drop highlighted how exposed crypto and risk assets are to exogenous shocks.”
Perfumo noted that the balance between institutional investor inflows and government bond demand has shifted, with short-term momentum weakening even as long-term capital remains strong.
“Demand from digital assets like MicroStrategy bonds has slowed, but ETF flows remain skewed bullish even during drawdowns,” he said. “This resilience shows that cryptocurrencies are gaining footing with traditional finance, despite a decline in short-term risk tolerance since the October liquidation event.”
Beyond the Fed, traders are also keeping an eye on the tightening liquidity environment. Early signs of renewed stress among US regional banks and a still uncertain global macro environment have led to a sharp decline in market depth across centralized exchanges.
“Liquidity is tight,” said Alice Lee, a partner at Foresight Ventures. “Early signs of stress in U.S. regional banks could prompt the Fed to halt QT early, but inflation risks are making policymakers cautious. Altcoins were widely sold off as BTC widened its drawdown and CEX order book liquidity fell to around 40% of pre-crash levels.”
As exchange-linked tokens stabilized after weeks of deleveraging, BNB-led stocks dominated relative outperformance, while speculative altcoins remained “PVP, or ephemeral, event-driven and low-conviction,” Lee added.
Despite the subdued tone, some analysts say the cryptocurrency market is stabilizing since the October 10 flash that wiped out about $1.2 billion in leveraged positions. Despite market conditions remaining fragile, the total value of crypto assets stands at around $3.9 trillion, comfortably above major moving averages.
FxPro analyst Alex Kupczykevich noted that Bitcoin’s technical settings are still trending constructively. “Bitcoin is above both the 50-day moving average and the 200-day moving average. The $117,000 to $120,000 area is a strong resistance zone, but the bullish structure remains intact on the rebound from the $108,000 support.”
As liquidity tightens and leveraged positioning is restructured, volatility could spike around Wednesday’s Fed announcement, especially if Powell’s tone signals slower easing.