(Bloomberg) -- The outlook for Bitcoin isn’t looking good.
The cryptocurrency slumped Wednesday to below $8,000 -- back to its lowest level since June -- amid an influx of bad news that’s also weighing on the rest of the digital-asset sector. Technical indicators suggest the milestone is significant, and could lead to further pain.
A sustained drop below the threshold risks having Bitcoin test the 200-day moving average of about $7,311. Bitcoin’s 50-day moving average also pierced the 100-day moving average, further indicating a poor technical outlook for Bitcoin.
“Today’s move lower is less about the magnitude and more about the correlation and direction,” said Jeff Dorman, chief investment officer at Arca, a Los Angeles-based asset manager that invests in cryptocurrencies. “We’re hearing that the broad-based selling is being driven more by market makers and those that are short pushing the market lower, rather than driven by long unwinds or selling.”
Sentiment has been hurt by the withdrawal of high-profile companies like Mastercard Inc., Visa Inc. and PayPal Holdings Inc. from Libra, a Facebook Inc.-led effort to create a cryptocurrency for use in global payments. And interest in CME Group Inc.’s Bitcoin futures has leveled off and even declined slightly in the third quarter -- the first time the measure slipped on quarter-to-quarter basis over seven periods.
“With volumes still quite low relative to this summer, shorts are incentivized to keep pushing prices lower until they hit resistance,” said Dorman. “This is very typical behavior in other illiquid asset classes.”
--With assistance from Kenneth Sexton (Global Data).
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