Bitcoin was trading around $113,000 in the Asian afternoon session on Wednesday as traders took a cautious stance ahead of the upcoming Federal Reserve policy announcement. The market sentiment was impacted by diminishing liquidity and a strengthening dollar across risk markets.
The leading cryptocurrency has gained 4.5% over the week but dropped 0.7% in the past 24 hours, reflecting slight declines in other major tokens. Ether was trading at $4,028, down 1.4%, while Solana’s SOL and Binance’s BNB saw declines of about 2%. XRP remained slightly elevated near $2.62, continuing a strong seven-day performance as traders shifted to high-volume tokens.
These movements precede an important Federal Open Market Committee (FOMC) meeting scheduled for Oct. 28–29, during which a 25 basis point cut to the benchmark rates is widely anticipated, bringing them to the 4.00%–4.25% range.
“The changing macroeconomic landscape is the primary factor driving this cryptocurrency cycle,” stated Thomas Perfumo, global economist at Kraken. “A 25bps reduction appears highly likely this week, and the market is already factoring in another cut by December. However, the sell-off on October 10 highlighted how vulnerable crypto and other risk assets are to external shocks.”
Perfumo observed a shift in the balance between institutional inflows and treasury demand, which is tempering near-term momentum, even as long-term capital remains stable.
“While demand from digital-asset treasuries, like MicroStrategy, is slowing, ETF flows are still skewed positively, even during downturns,” he mentioned. “This resilience indicates the increasing integration of crypto within traditional finance, despite a decrease in short-term risk tolerance following the events of October liquidation.”
In addition to the Fed, traders are monitoring tightening liquidity conditions. Early indications of renewed stress among U.S. regional banks, along with an uncertain global macro landscape, have resulted in significantly reduced market depth across centralized exchanges.
“Liquidity is tightening,” remarked Alice Li, partner at Foresight Ventures. “Initial signs of stress among U.S. regional banks might prompt the Fed to halt quantitative tightening sooner, but inflation concerns keep policymakers wary. BTC’s recent drawdown coincides with a broader sell-off in altcoins as CEX order-book liquidity has dropped to approximately 40% of its pre-drop levels.”
BNB-led assets showed relative strength as exchange-related tokens stabilized after weeks of deleveraging, while speculative altcoins remained described as “PVP — transitory, event-driven, and lacking conviction,” Li added.
Despite the overall cautious atmosphere, some analysts believe that the crypto markets are stabilizing following the October 10 event, which saw nearly $1.2 billion in leveraged positions liquidated. The total crypto market capitalization is now approximately $3.9 trillion, comfortably above key moving averages, even though sentiment remains fragile.
FxPro analyst Alex Kuptsikevich commented that Bitcoin’s technical indicators still look favorable: “BTC is maintaining its position above both the 50-day and 200-day moving averages. The $117K–$120K range represents strong resistance, but the bounce from the $108K support level keeps the bullish structure intact.”
As liquidity tightens and leveraged positions are re-established, volatility could increase around Wednesday’s Fed announcement, especially if Powell’s comments suggest a slower pace of easing.
