The US dollar gains momentum ahead of the FOMC meeting, putting pressure on the $28K support level of Bitcoin's price.

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As the markets processed new concerns regarding the stability of US banks, Bitcoin's price trended towards the $28,000 support level following the Wall Street opening on May 1.

Concerns are increasing regarding the potential spread of financial instability from First Republic Bank to other institutions.

At the time of writing, TradingView data indicated that BTC/USD had declined to lows not seen in several days.

Since the weekly and monthly candle close, the pair has been on a downward trajectory, losing over $1,000 during this period.

At the beginning of the week, Asia trading was met with a possible source of volatility as the US government sold First Republic Bank to JPMorgan Chase.

Despite concerns over the legitimacy of the sale, First Republic Bank's failure became the second-largest in US history. However, Bitcoin did not react similarly to its response to the beginning of the banking crisis in March. Instead, Bitcoin's price continued to decline, even as signs emerged of another potentially troubled lender, PacWest Bancorp.

On the day in question, PacWest's stock (PACW) dropped by 7%, returning to its lowest levels in a month. According to Marty Bent, the founder of crypto media company TFTC, this behavior was "eerily similar" to that of First Republic Bank. On that day, PACW was down nearly 60% year-to-date, while FRC, which was indefinitely suspended, had fallen by 97%.

Even with the uncertainty and the possibility of further turmoil, US equities remained relatively stable at the opening, causing crypto markets to remain on the more volatile side of the spectrum of risky assets.

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

Despite concerns over banking fragility, the markets had already factored in the potential for a 0.25% interest rate hike, with a probability of 94% according to data from CME Group's FedWatch Tool.

Dollar strength faces “huge week”

At the beginning of the week, one asset that exhibited notable strength was the US dollar, as the US Dollar Index (DXY) rose to its highest levels since mid-April.

“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.

In a previous discussion, key correlations were highlighted for observers, one of which was the correlation between the US Dollar Index (DXY) and Bitcoin.

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