Major cryptocurrencies were down on Wednesday morning as a flash crash in the price of bitcoin earlier this week wiped out over $200bn from the market.
“Over the last few days, bitcoin has been on a downward spiral after sentiment related to riskier assets took a beating,” said Naeem Aslam, chief market analyst at Ava Trade.
"The price action is currently testing the Ichimoku cloud technical pattern which supports the asset near $39,900… investors are closely monitoring these support levels for signs of further decline in prices."
The Ichimoku cloud is a collection of technical indicators that show support and resistance levels, as well as momentum and trend direction
The flash crash comes amid a brutal sell-off in markets, linked to China's Evergrande Group, as cryptos become more integrated into financial markets worldwide.
“The company has done extremely well since the great financial crisis, managing to leverage investment opportunities in a cash-intensive industry,” said Mati Greenspan, CEO of Quantum Economics.
“However, it seems that since financial conditions have become a bit more difficult, all that leverage is now tightening around them like a boa constrictor."
He said their stock has been declining steadily the entire year, and it seems “the drama has now spread globally.”
Meanwhile El Salvador, which started accepting bitcoin as legal tender earlier this month, took advantage of the fall in its price over the weekend to increase its holdings.
President Nayib Bukele said the country bought 150 bitcoins over the weekend, worth roughly $6.7m at current exchange rates.
The flash crash has also not deterred institutional investors, who continue to show interest in the block chain space.
VanEck, a mutual fund and ETF manager, has launched a bitcoin tracker fund and has filed to launch a strategy fund that will invest in bitcoin futures, as well as an exchange-traded fund that will invest directly in bitcoin, said Aslam.
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