(Bloomberg) -- Amid a protracted sell-off in cryptocurrencies, at least one technical indicator is painting a brighter picture.
Based on the trading envelope indicator, the Bloomberg Galaxy Crypto Index is nearing its lower limit, potentially signaling that selling pressure may dissipate and a short-term rally could ensue. The index, which has lost 10% this month, tracks a basket of the largest digital assets, including Bitcoin, Ether and XRP.
One catalyst could be Bitcoin, which has been on a downtrend for three straight weeks. A stabilization near the largest cryptocurrency’s 200-day moving average support line could bolster the Bloomberg Galaxy Crypto Index as well.
Cryptocurrencies have been on a persistent downtrend after China took steps in recent days to crack down on trading in the digital assets space. Amid the clampdown, crypto giants Binance Holdings Ltd. and Tron were banned on China’s largest micro-blogging service. News of the developments has helped push Bitcoin lower for six straight days.
“The whole digital currency market has not had a positive breakthrough this month and we could see continued pressure on Bitcoin,” Edward Moya, a senior market strategist at Oanda Corp., wrote in a note. Digital assets could see further pressure due to China’s crackdown, he said, but “for now the sellers appear to be firmly in control.”
--With assistance from Kenneth Sexton.
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