With liquidity thinning and macro uncertainty mounting, traders across crypto markets shifted to a more defensive stance.
The world’s largest cryptocurrency remains roughly 4.5% higher over the past week but has eased about 0.7% in the last 24 hours, reflecting softer sentiment across risk assets. Ether hovered near $4,030, down 1.4%, while Solana and Binance Coin slipped around 2%. XRP extended its recent strength, trading near $2.62 after a week of solid gains as traders rotated into higher-volume tokens.
Bitcoin traded steadily around $113,000 on Wednesday as investors braced for a potentially market-moving Federal Reserve decision later this week.
Waiting for the Fed
All eyes are on the Federal Open Market Committee (FOMC) meeting scheduled for Oct. 28–29. Policymakers are widely expected to deliver a 25-basis-point rate cut, bringing the target range down to 4.00%–4.25%. The decision could set the tone for risk markets heading into year-end, as investors gauge whether the Fed is nearing the end of its tightening cycle.
“The fluctuating macroeconomic backdrop remains the dominant driver of this crypto cycle,” said Thomas Perfumo, global economist at Kraken. “
A 25bps cut this week appears highly probable, and the market is already pricing in another by December. But the October 10 sell-off showed how exposed crypto and risk assets remain to external shocks.”
Perfumo added that capital flows in the sector are shifting. Institutional demand remains steady, but corporate treasury accumulation has slowed.
“Demand from digital-asset treasuries like MicroStrategy is cooling, yet ETF inflows are holding firm,” he said, adding “That resilience shows crypto’s growing foothold within traditional finance, even as short-term risk appetite weakens after the October liquidation event.”
*Corporate treasuries of Bitcoin and Ethereum have slowed accumulation following the October sell-off. Once a stable source of demand, these treasury teams are pausing purchases, leaving the market more reliant on macro-driven flows and remaining institutional buyers.
Liquidity concerns deepen
Beyond monetary policy, tightening liquidity remains a key theme. Market depth across centralized exchanges has fallen sharply in recent weeks, driven by renewed concerns about U.S. regional banks and lingering global macro risks.
“Liquidity is tightening,” said Alice Li, partner at Foresight Ventures. “Early signs of regional bank stress could push the Fed to pause quantitative tightening sooner than expected, but inflation risks are keeping policymakers cautious.”
Li added that liquidity across centralized exchange order books has dropped to around 40% of pre-selloff levels, amplifying price swings. “Bitcoin extended its drawdown, and altcoins sold off broadly. Exchange-linked tokens like BNB have stabilized somewhat, but most speculative altcoins remain purely event-driven with little conviction.”
This pullback in depth has made markets more vulnerable to volatility spikes, especially around major macro announcements. Many traders are reducing leverage and cutting exposure ahead of the Fed’s decision to avoid being caught by another sudden move.
A fragile stability
Despite the cautious tone, some analysts believe the worst of the October volatility may have passed. The mid-month sell-off erased roughly $1.2 billion in leveraged positions, but since then, the market has managed to hold above key technical levels.
Total crypto market capitalization stands near $3.9 trillion, well above major moving averages.
FxPro analyst Alex Kuptsikevich noted that Bitcoin’s technical structure remains constructive despite the macro headwinds. “BTC continues to trade above both its 50-day and 200-day moving averages,” he said. “The $117,000 to $120,000 range represents strong resistance, but the rebound from $108,000 suggests the broader bullish trend is still intact.”
*The subdued “Uptober” performance ties directly into the broader dynamics shaping the current cycle. As liquidity thins across centralized exchanges and retail participation softens, the market is increasingly sensitive to macro developments rather than traditional seasonal patterns.
As leveraged positioning rebuilds, traders expect volatility to rise around the Fed announcement, particularly if Chair Jerome Powell’s remarks hint at a slower pace of easing. A dovish tone could reignite risk appetite, but a more cautious message might deepen the current consolidation. For now, Bitcoin’s ability to hold above $110,000 amid tightening liquidity and shifting macro dynamics signals both resilience and fragility.
The next few days and the Fed’s tone, could determine which side prevails.
Oleksii Shumak
Disclaimer: All materials on this site are for informational purposes only. None of the material should be interpreted as investment advice. Please note that despite the nature of much of the material created and hosted on this website, HODL FM is not a financial reference resource and the opinions of authors and other contributors are their own and should not be taken as financial advice. If you require advice of this sort, HODL FM strongly recommends contacting a qualified industry professional.
