Bitcoin is nearing a critical juncture as its recent sell-off shows few signs of abating.

The largest digital token is nearing a crucial inflection point as its price inches closer to the lower band limit of the Trading Envelope Indicator. The gauge smooths moving averages to map out higher and lower limits, with a break below the lower band potentially preceding a retreat similar to the one seen on September 24, when the coin fell 12 per cent in one day.

READ MORE:
Bitcoin on the slide again
Bitcoin hits six-month low
Bitcoin loses nearly half its value in $200 billion wipe-out
Bizarre excuse for lawyer caught up in $624 million crypto scam

A bounce off the lower limit, on the other hand, could signal support at that level and, possibly, a rally similar to the one seen on October 25, when bitcoin posted a 15 per cent gain.

Advertisement

Whichever way it moves, Bitcoin is nearly certain to see one thing: more trading as its price ebbs closer to the lower level limit, the indicator suggests.

Cryptocurrency prices have been under pressure recently, with bitcoin losing more than 20 per cent over the past month. Other cryptocurrencies have also sold off after Chinese authorities took fresh steps to crack down on the trading of digital assets. Bloomberg News reported last week that at least five local exchanges there have already halted operations.

"The big narrative is around what's going on in China," said Dan Matuszewski, a principal at CMS Holdings. "What you started to see is China cracking down on a lot of the elements of crypto that have been operating inside the country."

Crypto faithfuls got another dose of bad news after U.S. authorities arrested a member of the Ethereum Foundation for violating international sanctions after he travelled to North Korea to give a cryptocurrency talk.

Bitcoin fell as much as 7 per cent on Monday to trade around US$7,166 (NZ$11,014). The Bloomberg Galaxy Crypto Index, which tracks some of the largest digital assets, lost as much as 5.8 per cent.