Bitcoin rose to an all-time high this morning according to a widely followed measure, breaking the $1,200 mark for the first time ever before dropping back steeply.
The cryptocurrency rose to a peak of $1,206.60 (£960) early on Friday morning, according to Coindesk, which uses measures from multiple exchanges to determine a price.
The price surged as hopes mounted the US Securities and Exchange Committee (SEC) will approve the creation of a bitcoin exchange-traded fund (ETF).
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The SEC has a deadline of 11 March to rule on whether an ETF, created by twins Tyler and Cameron Winklevoss (and Facebook investors made famous by the film, The Social Network) will gain regulatory approval.
If a bitcoin ETF is approved it will mark a further move towards the mainstream for a currency with its roots in the anarchic world of internet libertarianism.
ETFs allow investors to gain exposure to asset classes via a single instrument, and have become an increasingly prominent part of the financial world.
However, the volatility of bitcoin may stand in the way of increasing institutionalisation. With no underlying asset, price discovery is still an issue.
Mati Greenspan, senior market analyst at eToro, says: "Just now people are working out what it is; how to value it is a different matter."
"Anybody investing in bitcoin has to realise it's a very risky investment," he adds. The SEC will likely weigh the chances of big losses to investors when deciding on regulatory approval.
Bitcoin has also been boosted by controls on capital flight from China. The Chinese government has been keen to keep money within the country, with residents allegedly using the currency to move their cash across the border.
The Chinese government last month said it was monitoring bitcoin exchanges, in what was seen as an attempt to stem the outflow of capital.
Bitcoin by its nature and design is almost untrackable, which has caused it to gain notoriety on the internet’s black market “dark web” sites. Governments around the world are increasingly taking note of its use in criminal activities as well as the potential for tax evasion.
However, the cryptocurrency’s underlying technology, the blockchain, has also been seized upon by more traditional financial services firms as an ingenious way to remove the need for middle men or trusted third parties from transactions, by using a distributed ledger.