Cryptocurrencies Reach Inflection Point as Refuge Appeal Fades

(Bloomberg) -- The Bloomberg Galaxy Crypto Index is lingering near a key inflection point after trending lower since reaching a high for the year.

The index, which tracks major cryptocurrencies, faces support at 400, a resistance line it established between late October and early November. It's traded in its vicinity for the past six days without breaking meaningfully in either direction. If it maintains that support level, the index could bounce and rally. Should it fail to cling to the mark, however, 350 could be its next line of support.

The Bloomberg Galaxy Crypto Index has lost near 18% over the past two weeks amid a wider drawdown for digital assets. With global markets being whipsawed by the coronavirus crisis, cryptocurrencies have been under pressure. Adding to bearish sentiment have been reports of fresh scandals as well as Warren Buffett's pronouncement that digital assets have no value.

“Institutional traders are refraining from jumping back into the crypto space and favoring trading the wild swings with Treasuries and gold,” said Edward Moya, a senior market analyst at Oanda Corp. in New York.

Though many analysts have suggested digital currencies benefit as haven plays during times of market turbulence, many tokens failed to hold up during the latest rout. Bitcoin, the largest cryptocurrency, has lost 5% over the past month.

“Cryptocurrencies had some moments over the past year when one could argue it was a safe-haven trade, but that is definitely not the case now,” said Moya.

--With assistance from Kenneth Sexton.

To contact the reporter on this story: Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka

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