Bitcoin reverses weekend rally to drop below US$40,000

Bitcoin fell below US$40,000 on Monday, August 2, after climbing to its highest level since May. The largest cryptocurrency lost as much as 4.9% and traded at US$39.790 in Hong Kong before noon.

Other virtual coins like Ether, which is second in rank, also dropped. Analysts believe profit-taking was behind the declines. This is “just a normal pullback after bullish action”, said Mr Vijay Ayyar of the Asia-Pacific region at crypto exchange Luno in Singapore.

Bitcoin is now back at the top of the US$30,000-US$40,000 trading range, which has been in effect since May’s cryptocurrency rout. Recent weeks have seen support comments from Elon Musk, a billionaire, and Ark Investment Management chief executive Cathiewood. There has also been speculation about Inc’s potential involvement in the cryptocurrency market.

The industry is also under increasing scrutiny. This includes the push by US legislators for tighter regulations on cryptocurrency investors to collect higher taxes to finance a portion of a planned US$550billion (S$744billion) investment in transportation and power systems.

A software update to the Ethereum network is also expected this week, which crypto traders expect. This could increase Ether’s value by reducing the rate at which token supply increases.