Bitcoin prices edged up slightly on Wednesday, holding steady after recent gains as traders awaited the Federal Reserve’s upcoming interest rate decision, looking for clearer signals on U.S. monetary policy and the broader economy.
The world’s largest cryptocurrency hit its highest level in about a month on Tuesday, recovering some of the losses incurred in late August. Broader digital asset prices also climbed this week, supported by improved risk appetite amid growing expectations of a U.S. rate cut.
However, emerging doubts over corporate treasury strategies limited gains in the crypto market.
The Fed is widely expected to cut rates by at least 25 basis points at the conclusion of its meeting, with some traders betting on a larger 50 basis point reduction. These expectations have been reinforced by increasing signs of a cooling U.S. labor market, a key driver behind the Fed’s easing stance.
At the same time, persistent inflationary pressures in the U.S. have left markets uncertain about the Fed’s longer-term policy outlook. Fed Chair Jerome Powell has repeatedly expressed caution over the inflationary impact of elevated U.S. tariffs and is expected to address the issue later in the day.
Nonetheless, lower U.S. rates are generally seen as positive for cryptocurrencies, as they typically create more liquidity that can flow into speculative assets. Notably, the major bull run in digital assets in 2021 was largely fueled by ultra-low interest rates in the aftermath of the COVID-19 pandemic.
Meanwhile, data from CryptoQuant showed that the amount of Bitcoin held on centralized exchanges fell this week to its lowest level since January 2023, suggesting more investors are moving their coins off exchanges into private storage, reducing immediate selling pressure.
The same data also indicated that stablecoin balances on exchanges are rising, pointing to increased active liquidity in the market. This could signal that investors are preparing for potential buying activity in the coming days, which in turn may drive further gains in cryptocurrency prices.
Against this backdrop, crypto markets moved in a narrow range on Wednesday, as traders preferred to stay on the sidelines ahead of the Fed’s decision. Ethereum slipped 0.8% to $4,492.59, while XRP rose 0.4% to $3.0152.
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