The price of Bitcoin (BTC-USD) has surged to a new record pushing to above $33,000 (£24,135) for the first time in history on Sunday, after it crossed the $30,000 mark on Saturday.
It soared by 18% on Sunday morning, reaching a new all-time high above $34,000, before trickling back down. Other digital coins, such as Ethereum and Litecoin, also recorded sharp price increases.
Bitcoin’s record-breaking rally has seen the cryptocurrency increase by more than 300% in 2020.
In December, bitcoin passed the $20,000 mark for the first time, a psychologically significant level bulls had been targeting for months.
It comes as lockdowns and fears of a global recession, due to the coronavirus pandemic, sent investors flocking to alternative financial assets.
Paolo Ardoino, chief technology officer at the exchange Bitfinex, said the market for digital coins had “seemingly never been more bullish.”
But, some analysts think Bitcoin’s price could rise even further as the US dollar declines further.
The value of the US currency rose in March at the start of the COVID-19 pandemic as investors sought safety amid the uncertainty.
But, it has since dropped due to major stimulus from the US central bank the Federal Reserve. The dollar (GBPUSD=X) ended 2020 with its biggest annual loss since 2017.
Why is it rallying?
Bitcoin, which is a cryptocurrency — a coin that exists online — is traded and recorded using blockchain technology — a digital ledger of all past transactions.
Its rally has been aided by signs that cryptocurrency is becoming more integrated into the financial system.
Last year, a number of financial institutions and well known investors, including Paul Tudor Jones and Stanley Druckenmiller threw their weight behind cryptocurrencies and blockchain technologies which sent its price skyrocketing.
In October, Bitcoin got a big boost in sentiment after California-based payments platform, PayPal (PYPL) allowed its customers to hold the cryptocurrency in their digital wallets.
US account holders will be able to deal in digital coins, including Bitcoin, Ethereum, Bitcoin Cash and Litecoin in the coming weeks and plans to expand to Venmo and some countries in the first half of 2021.
Cryptocurrency users will be able to use their holdings to pay for goods and services at PayPal’s 26 million merchants worldwide from early next year. But, merchants will not receive virtual coin payments, with cryptocurrency payments being settled using fiat currencies, such as the US dollar, the company said.
Last month, JP Morgan said: "Even a modest crowding out of gold as an 'alternative' currency over the longer term would imply doubling or tripling of the Bitcoin price."
However, there is some difficulty in actually spending Bitcoin, with digital coins rarely accepted aside from on the dark web where their anonymous nature makes them preferable currency.
When the currency set a record high in November, economist Nouriel Roubini called it a “pure speculative asset and bubble with no fundamental value.”
Watch: Why can't governments just print more money?