The cryptocurrency market has entered a cautious phase, with Bitcoin trading around $112,100 in early Asian hours. While this represents a minor 1.8% dip over 24 hours, the asset remains up 3.4% for the week as investors pause ahead of the U.S. Federal Reserve’s anticipated interest rate announcement.

Traders Prepare with “Dry Powder”

Market activity has subdued as traders are reportedly consolidating their positions rather than making aggressive moves. According to Gracie Lin, CEO of OKX Singapore, the current environment has created a “dry powder economy,” where trading desks are quietly building positions while keeping the majority of their capital in stablecoins. This behavior suggests that market participants are preparing to deploy funds once the Fed’s decision introduces more clarity.

This sentiment is echoed by the Singapore-based market maker Enflux, which noted that traders are rotating funds into USD stablecoins and focusing on deep order books. The firm also observed that traders are using less leverage compared to previous rallies, indicating more cautious positioning before the announcement.

Bitcoin Holds Firm as Gold Falters

While the crypto market waits, other assets are showing more volatility. Gold fell to a three-week low near $3,950, a notable drop considering some analysts had recently forecast prices reaching nearly $5,000 within a year. According to Enflux, this divergence could signal a capital rotation from precious metals into digital assets as investors seek higher-return opportunities.

Throughout this period, Bitcoin has established a solid support level at $110,000, with buyers consistently stepping in at this price point over the past week. Meanwhile, Ethereum has underperformed Bitcoin, declining 3.8% to around $3,970 as capital appears to be flowing toward Bitcoin and stablecoins.

Broader Markets Remain Hopeful

The cautious mood in crypto contrasts with some optimism in traditional markets. Japan’s Nikkei 225 index climbed over 1% to a record above 51,000, and U.S. stock futures posted modest gains. Easing trade tensions between the U.S. and China have also helped support market sentiment.

The Federal Reserve is widely expected to announce a quarter-point rate cut, which would be the first reduction since July. With the decision largely priced in by futures markets, investors are now watching for the central bank’s forward guidance to dictate the market’s next major move.