Last week was a horrible week for cryptocurrency markets. Bitcoin,ETH, XRP, LTC registered double digit losses, with ETH and LTC losing more than 20% of their value--see Table 1.

Table 1

Seven-Day Price Change For Major Cryptocurrencies

Source:Coinmarketcap.com 9/28/19 at 11:40 a.m.

The losses spread across the entire market, with only 11 out of the top 100 cryptocurrencies advancing and 89 decliningsee Table 2.

Table 2

Number of Cryptocurrencies That Advanced/Declined In The Top 100 Ranks

Source:Coinmarketcap.com 9/28/19 at 11.40 a.m.

The board sell-off in cryptocurrencies coincided with a couple of events that should have been bullish rather than bearish for the digital currency. One of them is the introduction of Bakkt Bitcoin futures.

Thats a positive development for cryptocurrency markets. Futures contracts could solve one of Bitcoins problems: market volatility, and help the digital currency to become peoples currency. Gain broad acceptance among merchants as a medium of exchange, that is.

Then theres the rising uncertainty in Washington that shook Wall Street.

That should have been positive for Bitcoin, too, as the digital currency is supposed to be a hedge against uncertainty.

Does anyone know what caused the sell-off?

Nicholas Pelecanos, Advisor to NEM Ventures, offers a couple of clues. One of them is technical. The BTC price has seen a 20% sell offthis week after breaking out to the bottom side of the descending triangle pattern its price had been consolidating in since late June, he says.

Then theres the news of a flush crash in the Bitcoin hash rate. News of a 40% flash crash in the Bitcoin hash rate (the metric usedtomeasure the amount of computational power securing the blockchain) was touted as the cause of the dump in price, but I dont necessarily agreethis caused fall in price or actually happened, says Pelecanos.

But he doesnt believe that the flush crush, indeed,happened. For a 40% flash crash in the hash rate to occur,40% of mining rigs securing the network would have had to shut off at the same time.I believe amore likely explanation for the reported fall in hash rate canprobablybe found in themethods blockchain monitoring websiteslike Blockchain.comuse tocalculate the hash rate.

Simply put, cryptocurrency markets may have been misreading the news.

And theres the Bakkt event, which tricked Bitcoin traders.

The thinking on Bakkt was thatthe futures volume would end up being net long asthe contracts areBTC settled unlikethe CME futures which are cash settled, Pelecanos says. This would mean that finally the institutional money could flow into BTC and pump the market, I still believe thiswill be thecase. As this didnt happen on the first week of Bakkt going live,sentiment changed under the shadow of a large bearish descending triangle.

Again, cryptocurrency markets could have been misreading the news. Wall Street is trying to reduce rather than raise market uncertainty.

Still, he thinks that the sell-off is overdone. Several indicators, both technicalandquantitative, are startingto show signs of BTC beingoversold, he says. Oneofthe main indicators Im keeping my eye on is our network valuemodel. This model helps us predict price action 3 days in advance with a 70% correlation. Generally,when the network value climbs above the market price, its a signal for bulls to rush in.

Thats what happened back in 2017 and 2018, when the Bitcoin market bottomed.

Will history repeat itself? It remains to be seen.

More here:

Bitcoin, ETH, XRP, LTC, And XLM Sell-off -- Is It Overdone? - Forbes