Bitcoin rose to near $113,000 in the Asian afternoon hours on Wednesday as traders turned cautious ahead of this week’s Federal Reserve policy decision, a lack of liquidity and a stronger dollar weighed on sentiment in risk-on markets.
The world’s largest cryptocurrency was up 4.5% last week, but slipped 0.7% over the past 24 hours, mirroring modest losses in the leading token. ether It traded down 1.4% at $4,028, while Solana’s SOL and Binance’s BNB each fell about 2%. XRP remained slightly above $2.62, extending a strong seven-day run as traders turned to the higher-volume token.
The move comes ahead of the crucial Federal Open Market Committee (FOMC) meeting on October 28-29, where officials are widely expected to cut benchmark rates by 25 basis points to a range of 4.00%-4.25%.
“The volatile macroeconomic backdrop is a key driver of this crypto cycle,” said Kraken global economist Thomas Perfumo. “A cut of 25 bps this week seems highly probable, and the market is already pricing in another run to December. But the October 10 selloff underlined just how sensitive crypto and risk assets are to external shocks.”
Perfumo said the balance between institutional flows and fiscal demand has shifted, reducing near-term momentum while long-term capital remains stable.
“Demand from digital-asset treasuries like MicroStrategy is slowing, but ETF inflows continue to be bullish even during the downturn,” he said. “That resilience reflects crypto’s growing catch-up with traditional finance, even as short-term risk tolerance has declined since the October liquidation event.”
Apart from the Fed, traders are also seeing tightening liquidity conditions. Early signs of renewed tensions between US regional banks and a still uncertain global macro environment have sharply reduced market depth at centralized exchanges.
“Liquidity is getting tighter,” said Alice Lee, partner at Foresight Ventures. “Early signs of US regional bank stress could prompt the Fed to pause QT soon, but inflation risks keep policymakers cautious. BTC extended its decline and altcoins sold off extensively as CEX order-book liquidity fell to about 40% of pre-drop levels.”
Names led by BNB dominated relative outperformance as exchange-linked tokens stabilized after weeks of deleveraging, while speculative altcoins remained “PVP – fleeting, event-driven and low conviction,” Lee said.
Despite the subdued tone, some analysts say crypto markets are stabilizing after the October 10 flood in which approximately $1.2 billion of leveraged positions were wiped out. Total crypto capitalization sits around $3.9 trillion, which is well above the major moving averages, even though sentiment remains fragile.
FxPro analyst Alex Kuptsikevich said Bitcoin’s technical setup is still constructive: “BTC remains above both its 50-day and 200-day moving averages. The $117K-$120K area is a strong resistance zone, but the rebound from $108K support maintains the bullish structure.”
As liquidity strengthens and leveraged positions rebuild, volatility could increase around Wednesday’s Fed announcement – especially if Powell’s tone signals a slow easing.