- May 6, 2023
- Posted by: [email protected]
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Bitcoin’s price remained near four-day lows despite concerns about the stability of the US banking sector. On May 1, BTC headed towards $28,000 support after the Wall Street open, as markets digested fresh US banking jitters. However, Bitcoin bulls failed to gain a grip, with BTC/USD dropping to multi-day lows, shedding over $1,000 since the weekly and monthly candle closes.
The potential volatility catalyst for the start of the week was the sale of First Republic Bank to JPMorgan Chase by the US government. This move caused volatility amid suspicions about its legitimacy. First Republic became the second-largest bank failure in US history, but Bitcoin showed little interest in mimicking its reaction to the start of the banking crisis in March. Instead, Bitcoin tracked lower despite warning signs that another lender might already be in trouble.
This lender was PacWest Bancorp, whose stock, PACW, saw a 7% drop on the day, returning 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, US equities were calm at the open, leaving crypto markets on the more volatile end of the risk asset spectrum. Traders considered the possibility of a comedown in advance of the Federal Reserve’s decision on interest rates, which was heavily priced in by markets. Data from CME Group’s FedWatch Tool measured the probability at 94% on the day.
Some traders anticipated 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.
One asset, meanwhile, showing keen strength to start the week was the US dollar, with the US Dollar Index (DXY) challenging its highest levels since mid-April. Financial commentator Tedtalksmacro argued that markets should not “expect” the Fed to hint at a pivot or freeze of rate hikes at this week’s meeting, which in itself would boost the dollar and risk-off sentiment.
In terms of broader market sentiment, the US dollar’s strength highlights the risk-off tone that dominated the markets in the first half of the year. A prior thread flagged key correlations for observers, including DXY versus BTC. As the week continues, it will be interesting to see how the markets evolve, particularly in the context of the US dollar’s strength and Bitcoin’s response to the ongoing concerns over the stability of the US banking sector.
