Bitcoin price threatens $28K support as pre-FOMC mood boosts US dollar

Bitcoin (BTC) headed toward $28,000 support after the May 1 Wall Street open as markets digested fresh United States banking jitters.

Suspicions mount over First Republic contagion

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD dropping to multi-day lows at the time of writing.

The pair continued a comedown that began after the weekly and monthly candle close, shedding over $1,000 since that time.

The start of the week saw a potential volatility catalyst during Asia trading as First Republic Bank was sold to JPMorgan Chase by the U.S. government.

Amid suspicions over the legitimacy of the move, First Republic became the second-largest bank failure in U.S. history.

Bitcoin showed little interest in mimicking its reaction to the start of the banking crisis in March, instead tracking lower despite warning signs that another lender might already be in trouble.

This came in the form of PacWest Bancorp, the stock of which, PACW, saw a 7% drop on the day to return to its lowest levels in a month.

For Marty Bent, founder of crypto media company TFTC, the behavior was “eerily similar” to First Republic. PACW was down nearly 60% year-to-date on the day, while FRC, now suspended indefinitely, had dived 97%.

Despite the turmoil and potential looming continuation, U.S. equities were calm at the open, leaving crypto markets on the more volatile end of the risk asset spectrum.

Reacting, traders considered the possibility of a comedown in advance of the Federal Reserve’s decision on interest rates due on May 3.

This was nonetheless already heavily priced in by markets, which anticipated a 0.25% hike as a near certainty despite the banking fragility. Data from CME Group’s FedWatch Tool measured the probability at 94% on the day.

Dollar strength faces “huge week”

One asset, meanwhile, showing keen strength to start the week was the U.S. dollar, with the U.S. Dollar Index (DXY) challenging its highest levels since mid-April.

Related: Second-biggest US bank failure — 5 things to know in Bitcoin this week

“Huge week coming up, particularly for the US dollar. Expect defensive positioning leading into Wednesday,” financial commentator Tedtalksmacro wrote in part of ananalysis.

He argued that markets should not “expect” the Fed to hint at a pivot or freeze of rate hikes at this week’s meeting, this in itself boosting the dollar and risk-off sentiment.

A prior thread flagged key correlations for observers, these including DXY versus BTC.

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