Bitcoin jumped past $40,000 for the first time on Thursday, after trading more than 20 percent higher for the day. The digital currency was trading at $40,259 as of 10:42 am ET, according to CoinDesk’s bitcoin price index.
The world’s largest cryptocurrency by market capitalization reached an all-time high of $20,000 exactly two weeks ago (December 17), driven by strong market sentiment. Since then however, prices have tumbled by 38 percent to current levels.
However, despite the sharp pullback which has seen bitcoin lose over half of its value since mid-December highs of around $20,000 – it is still up more than 1,400 percent on a year ago.
For the first time on some exchanges, marking a 10% surge since Christmas Day. Bitcoin dropped below $20,000 in mid-December. The cryptocurrency traded about 2.5% higher at $40,091 on CoinDesk’s Bitcoin Price Index . Bitcoin was down 0.7% to $39,707 on Wednesday afternoon. Bitcoin has climbed 1,200% this year and has skyrocketed 29% over the past month. Even with the recent spike, bitcoin is still below its all-time high of almost $20,000 set last month before Christmas Eve when it was trading near $19,500 on some U.S.-based exchanges including Coinbase and Gemini . Bitcoin futures on Cboe ( CBOE ) briefly fell 7% Tuesday morning to $26.50 per contract, down from around $30 per contract, while futures on the CME Group’s exchange traded higher at $29.25.
Sathvik Vishwanath , CEO of India-based cryptocurrency exchange Unocoin said in an email that “demonetization has given a significant push to digital currency adoption”. Cash was pulled out of the Indian economy late last year when Prime Minister Narendra Modi declared most high-denomination rupee notes invalid – 86% by value – overnight in an anti-corruption drive .
“Many people are buying bitcoin because it is becoming trendy in India,” Vishwanath said. After setting up shop in 2013, Vishwanath said Unocoin saw a huge spike in users last year from 200,000 to more than a million.
Bitcoin is gaining more legitimacy among traditional investors. Last month, San Francisco-based hedge fund two flow traders began offering bitcoin futures on a swap execution facility , a trading platform used by institutional investors. And the Chicago Board Options Exchange has said it plans to list bitcoin futures this year .
“The market infrastructure surrounding bitcoin is maturing,” Thomas Glucksmann , head of APAC business at Hong Kong-based bitcoin exchange Gatecoin, told CNBC via email. In China, cryptocurrency exchanges have been closing amid new government regulations aimed at containing financial risks. But there may be bargains in some of those markets after steep declines, Glucksmann said. “Some of the Chinese exchanges have dropped exchange rates by 80 percent to 90 percent compared to when they were at their all-time high,” he said.
But there are concerns that government regulation could stifle digital currency’s breakneck growth. Bitcoin has been under fire lately because it is often used for illicit transactions , including drug dealing and money laundering . Last week, several European governments announced plans to further regulate virtual currencies following bitcoin’s meteoric rise. France wants to regulate bitcoin as a commodity while Germany wants stricter rules on money laundering and transparency.
Korea also introduced new rules last week that will force cryptocurrency traders to give up their personal information for anti-money laundering purposes . That law goes into effect Jan. 30.
While new regulations may help boost transparency and weed out criminal activity, they could also limit bitcoin’s growth potential. “For the market to realize its full potential it does need regulatory clarity,” Glucksmann said.
“We see some governments such as South Korea or China potentially looking at regulating cryptocurrency exchanges like a traditional financial institution,” he added. “This would make life easier for investors and users and we expect more countries to follow suit.”