Bitcoin is hovering in a narrow range as traders await the Federal Reserve’s interest-rate decision, with a growing share of capital moving into stablecoins rather than directly into major cryptocurrencies.

BTC was around $75,470.81, while the market has spent the past 24 days confined to a range of approximately $76,000 to $80,000. Bitcoin volatility has also slipped to a one-month low.

Markets are pricing a 92.5% chance of a rate increase, which would be the Fed’s first hike in three years. Strong employment figures and persistent inflation have reinforced expectations for a quarter-point move.

With the decision largely anticipated, traders appear reluctant to make major bets before the announcement.

“The bond market has done its job and fully priced in tomorrow’s hike,” said Chris Sullivan of Hyperion Decimus. He said a surprise decision to leave rates unchanged could prove more disruptive, as investors may question why policymakers chose not to follow the move that markets had been expecting.

Stablecoins Become the Preferred Holding

Talos data shows that traders have been increasing their exposure to stablecoins ahead of the Fed meeting.

Research analyst Cooper Duschang said the platform has recorded a 28% net buying tilt toward stablecoins. That compares with an average 8% selling tilt around earlier Federal Open Market Committee meetings.

At the same time, traders have reduced their conviction in bitcoin and ether.

Bitcoin’s buying conviction has dropped to 3% from 10%, while ether’s has declined to 9% from 23%.

“The clearest shift has been into stablecoins,” Duschang said, explaining that investors appear to be “reducing risk and holding greater liquidity ahead of the Fed.”

The more important question may come after the decision: whether that parked liquidity is redeployed into crypto once the rate uncertainty passes.

Futures Market Shows Limited Leverage

Bitcoin’s muted response to expected monetary-policy changes has precedent.

Duschang said BTC barely moved around the Fed’s July 2023 rate hike because traders had already priced in the decision.

Current derivatives data similarly points to restrained leverage. K33 Research said open interest across bitcoin futures and perpetual contracts remains below its yearly average.

With leverage relatively contained, the market has less exposure to the type of forced liquidations that can accelerate an ordinary sell-off.

Oil Could Complicate the Inflation Picture

Energy prices remain a potential source of additional pressure. Crude has gained more than 20% in five days, according to Mark Connors, chief investment officer at Risk Dimensions.

A sustained increase in oil prices could feed inflation even as the Fed raises borrowing costs to slow demand.

Connors described the expected hike as “using a pitchfork to bail out our boat of inflation,” arguing that interest-rate policy has limited ability to address price pressures caused by an oil supply shock.

For bitcoin, the immediate rate decision may therefore be less important than the Fed’s guidance afterward. Traders are likely to focus on Fed Chair Kevin Warsh’s remarks for indications about the path of policy beyond Wednesday.

Stablecoin activity could offer another clue. A renewed flow of sidelined stablecoin capital onto exchanges following the decision would show that traders who reduced risk ahead of the meeting are beginning to put money back to work.