Bitcoin (BTC) hovered around $28,000 following the Wall Street open on May 1, as the crypto market reacted to uncertainty in the US banking sector. The world’s most valuable digital currency slipped to several-day lows amid continued speculation that followed the US government selling First Republic Bank to JPMorgan Chase, making it the second-largest bank failure in US history. Despite this cause for concern, US equities opened in a relaxed manner, leaving the crypto markets at the riskier end of the asset spectrum.
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD dropping to multi-day lows since the weekly and monthly candle close, shedding over $1,000. Bitcoin showed little interest in following its reaction to the start of the banking crisis in March, tracking lower despite warning signs that another lender may already be in trouble.
This came in the form of a 7% drop in the stock of lender PacWest Bancorp, the largest one-day fall in a month. PACW was down nearly 60% year-to-date on the day, while FRC, now suspended indefinitely, had dropped 97%.
Marty Bent, founder of crypto media company TFTC, observed this behavior was “eerily similar” to First Republic. Despite the turmoil and potential fallout, traders considered the possibility of a comedown before the Federal Reserve’s decision on interest rates scheduled for May 3, which was already heavily priced by markets, with a 94% probability on the day anticipating a 0.25% hike.
One asset benefiting from the uncertainty was the US dollar, with the US Dollar Index (DXY) challenging its highest levels since mid-April. Tedtalksmacro, a financial commentator, argued that markets should not expect the Fed to hint at a pivot or freeze of rate hikes in the forthcoming meeting, as this theory was strengthening the dollar and risk-off sentiment. US markets may be positioning defensively leading into the decision, but Tedtalksmacro reminded observers to watch the relationship between DXY and BTC, as well as DXY and equities.
In conclusion, Bitcoin’s future movements will depend on market sentiment in the coming days. Financial markets await the Federal Reserve’s decision on interest rates and continue to monitor the US Dollar Index (DXY). Bitcoin and the rest of the crypto asset spectrum will continue to be influenced by these major market factors, but it will take time for further developments to become clear. For the time being, Bitcoin continues to trade around the $28,000 support level as the next major support level at $20,000.