The price of bitcoin surged above the $40,000 level over the weekend for the first time since mid-May, but the rally started to retreat on Sunday.
Bitcoin peaked above $42,000 on Saturday, according to Coindesk data, but by Sunday evening, had retreated to around the $39,600 level.
The largest cryptocurrency is gaining for a 10th day in the past 11 and traded up to $42,390 on Saturday, its highest level since May 20. Market watchers have pointed to $40,000 as an important inflection point.
Bitcoin has surged since dipping below $30,000 on July 20, partly because investors see it as a hedge against inflation and currency values if and when the Federal Reserve starts tapering its $120 billion-a-month asset purchases.
Over the past two weeks, Bitcoin has broken past the upper bound of a prolonged trading range between US$30,000 and US$40,000. Bulls have taken heart from recent positive comments from billionaire Elon Musk and Ark Investment Management LLC’s Cathie Wood, as well as speculation over Amazon.com Inc.’s possible involvement in the cryptocurrency sector.
At the same time, scrutiny of the industry is intensifying. That includes a push by U.S. legislators for stricter rules on cryptocurrency investors to collect more taxes to fund a portion of a planned US$550 billion investment into transportation and power systems.
While bitcoin is about flat over the past five days, it’s up 14% over the past month, and up 38% year to date.