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Bitcoin falls slightly after reaching nine-month high over weekend

On Sunday morning, the digital currency reached around US$7,542 before falling back to around US$7,396 by mid-afternoon trading on Monday

Bitcoin mining
Despite the rally the currency is still well below its record high of around US$17,000 that it reached in December 2017

Original cryptocurrency Bitcoin has fallen slightly after a surge at the weekend that saw it reach a nine-month high of over US$7,500.

On Sunday morning, the digital currency reached around US$7,542  -- the highest level since August -- before falling back to around US$7,396 by mid-afternoon trading on Monday.

READ: Why the next Bitcoin rally could be closer than you think

As is often the case with the crypto sector, other well-known cryptocurrencies seemed to be riding the coattails of the Bitcoin rally, with Ethereum hitting a six-month high of around US$200 on Sunday while Litecoin was trading at around US$92 a pop, just below its three-month high of US$92.3 in early April.

While the reason behind the rise (like many things in the crypto and blockchain sector) seems to have many stumped, Lukman Otunuga, research analyst at spread-better FXTM, said that it was “coincidental” that Bitcoin’s rally had occurred around the same time of heightened trade tensions between the US and China.

“While it’s far too premature to suggest that Bitcoin has restored itself as a potential safe-haven asset for investors, the idea will attempt to pick up further momentum if the cryptocurrency continues to explode higher amid the risk-off conditions," Otunga said.

Meanwhile, Neil Wilson, chief market analyst at Markets.com, said that the momentum in the currency was building and could potentially develop into another buying frenzy.

“You cannot ignore that once Bitcoin builds up a head of steam, the mania can come back, and the momentum traders will pile in. This is a pure momentum play and the chart is looking parabolic again."

However, Wilson cautioned that the market for Bitcoin looked “increasingly overbought” with the currencies 14-day relative strength index (RSI), a momentum indicator, close to 90%. By comparison, a stock or asset is usually considered overbought when the RSI is over 70%, with a pullback in the price following shortly after.

Despite its rally, Bitcoin is still trading far below its record high of around US$17,000 that it reached in December 2017, which was shortly followed by a price crash that saw its value drop by over 50% by the start of February.

--Updates Bitcoin price and adds analyst comment--

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