Bitcoin, the decentralized digital currency with global name recognition, has jumped in value once again.
The value of the cryptocurrency surged past $2,000 US onÂ May 20, according to data from institutional digital currency exchange GDAX. A single virtual “coin” cost $2,262 USÂ (about $3,057 Cdn) late Tuesday afternoon,Â GDAX data showed.
The value of bitcoin has surged more than 400Â per cent in the past year, according to data from Bloomberg.
The currency hasÂ been subject to wild fluctuations in the past. Between Oct. 2 and Nov. 29, 2013, the price of bitcoin rocketed from $116.89 to $1,108.80, according to data from GDAX’s retail trading counterpart Coinbase. The digital currency went on to shed much of that value over the following year.
BitcoinÂ remains volatile, falling below $2,000 on GDAX Monday nightÂ before rising above that mark once again.
A GDAX executive said professional financial players have started tradingÂ bitcoin directly. The increase in bitcoin prices over the past six months hasÂ “really correlated very tightly with a lot of new inbound institutional interest,” said Adam White, vice-president ofÂ GDAX.
Bitcoin and other digital currencies “aren’t going away,” said White. “They’re going to be a core part of the financial system, most likely.”
One currency market watcherÂ is more guarded about bitcoin’sÂ place in the financial world.
“What’s happened is, you have this virtuous cycle of a rising price [which] legitimizes the currency, and then it attracts more interest into the currency,” said Adam Button, a currency analyst with ForexLive.com.
“Bitcoin is a classic mania,” Button said.Â “There is no fundamental underpinning for it, other than it’s a compelling technological story. But the only people using bitcoin are nerds and criminals, and far more the second category than the first category.”
As the price of bitcoin rises, Button said, owners are more likely to hoard the currency, reducing supply and driving up prices even more. Furthermore, he said, some market participants are piling into the currency in anticipation of a futureÂ bitcoin exchange-traded fund that could be traded openly on financial markets.
“The thinking in the financial community is that it’s about to become much easier to buy and sell bitcoin the sameÂ way you would buy or sell a stock,” Button said.Â “A large portion of the latest run-up is market participants trying to front-run that.”
The spike in bitcoin prices hasn’t dissuaded people from using the currency to make transactions, according to James Walpole, marketing and communications manager with U.S.-based bitcoin payment processor BitPay.
“We are seeing bitcoin being used more and more as an actual payment technology, and that utility is certainly going to contribute to the overall perceived value of bitcoin as a technology, and its overall stability,” he said.
Walpole said his company has seen increasing use of bitcoin as a payment method, particularlyÂ by companies based inÂ or operating inÂ Asian countries.
“Seeing bitcoin continue to be adopted, even during times when the bitcoin price is going down, as we’ve seen at BitPay, is a really good sign that this is not just a fad, it’s not just a speculative asset,” said Walpole. “It actually has something real going on behind it.”
Between Nov.Â 16, just before the latest run-up in bitcoin prices began, and March 17, BitPay has seen transaction volume grow by 80 per cent, according to Walpole.
The open-source software that powers bitcoinÂ was released at the start of 2009. Since then, the cryptocurrency has garnered attention worldwide as a low-cost, digital-friendly way to store money and make payments. For some bitcoin users, the lack of a controlling central bank is a selling point.
Bitcoin has also made headlines for its popularity among criminals.
In the past few weeks, aÂ series of ransomware attacksÂ believed to have been based on a leaked NSA cyberweaponÂ crippled computer systems across Europe and throughout the world. The hackers behind the attack encrypted data and held it hostage, demandingÂ bitcoin ransoms in exchange.
The cryptocurrency also gained notoriety after major bitcoin exchange Mt. Gox went under in 2014. Hundreds of millions of dollars’ worth of the cryptocurrency went missing.
Other digital currenciesÂ have followed bitcoin’s rise, with big names includingÂ Ripple, Ethereum, LitecoinÂ and Dash. A recent analysis by TechCruch found that bitcoinÂ accounts for 47 per cent of cryptocurrencies by market capitalization.