Bitcoin drops after posting biggest weekly gain in three months

Bitcoin pulled back to around $40,000 after climbing over the weekend to the highest levels since May.

The largest cryptocurrency fell about 4.8 per cent to $39,280 as of 8.42am in New York after dropping as much as 5.6 per cent on Monday. Other virtual coins including second-ranked Ether also fell. Analysts suggested profit-taking lay behind the declines.

This is “just a normal pullback following bullish action,” said Vijay Ayyar, head of Asia Pacific with crypto exchange Luno in Singapore.

The declines put Bitcoin back in the top end of a $30,000 to $40,000 trading range that’s been in place since a cryptocurrency rout in May. It touched $42,605 on Sunday, the highest since May. It rallied almost 20 per cent last week, the biggest increase in three months.

The token has been helped in recent weeks by supportive comments from billionaire Elon Musk and Ark Investment Management’s Cathie Wood, as well as speculation over Amazon.com’s possible involvement in the cryptocurrency sector.

At the same time, scrutiny of the industry is intensifying. That includes a push by US legislators for stricter rules on cryptocurrency investors to collect more taxes to fund a portion of a planned $550bn investment into transportation and power systems.

Crypto traders are also awaiting a software upgrade expected this week to the Ethereum network. It could boost Ether’s price by trimming the pace at which the token’s supply grows.