Green light illuminates the case of a mining rig operating inside a shipping container converted into a mobile cryptocurrency mining farm in Russia. (Photographer: Andrey Rudakov)  

Crypto Technicals Flash Pain Ahead, Eye Bitcoin at $4,000

(Bloomberg) -- Cryptocurrency technical analysts are warning against buying on the dip after the sell-off that shaved $600 billion from the value of digital coins since January.

A gauge of the 10 biggest, most liquid digital coins dropped to its lowest this year on Wednesday, triggering a flurry of technical studies. While Bitcoin, the largest cryptocurrency, hasn’t hit a similar trough since June 29, it’s attracting bearish calls as it slips below its 50-day moving average.

Even as it rebounded on Thursday, the digital token has failed to trade above widely followed retracement levels despite a smattering of good news, such as reports of greater interest from Wall Street in providing services for cryptocurrency trading. Bitcoin rose 2.9 percent to $6,500 as of 11:19 a.m. in New York.

Crypto Technicals Flash Pain Ahead, Eye Bitcoin at $4,000

“You’re getting a bounce today, but I expect the next level of support down close to $6,100,” Rob Sluymer, a technical strategist at FundStrat Global Advisors in New York, said in an interview. “It’s pretty early to make the case that you need to go long. It’s got to stabilize first.”

Bloomberg Intelligence analyst Mike McGlone said Bitcoin is poised to weaken even further, to 2017’s average level. “Bitcoin is in dump mode, following the pump run-up on the potential for a U.S. ETF,” he said in an interview. “It may not subside until revisiting good support near $4,000 -- last year’s mean.”

He called this year’s correction “tame” compared with those seen in previous years.

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