The price of bitcoin has jumped more than 30 percent in the past week, rallying back past $500 and raising questions of whether the spike is temporary or a new normal.
While bitcoin's price started off the year in the $800-$900 range, it began to tumble in February thanks to a series of bad news, including the shutdown of the Mt. Gox exchange. Save for a brief boost in mid-April, bitcoin has been trading below $500 since late March.
Gil Luria, managing director of Wedbush Securities, an equities firm that tracks the bitcoin market, says the recent price rally is simply because there's been "a lack of bad news" about bitcoin lately. "It's allowing bitcoin to appreciate again," he says.
Perhaps helping fuel the good feelings about bitcoin was this month's Bitcoin 2014 Conference in Amsterdam, Luria says. "People came away feeling very optimistic about where bitcoin is headed," he says.
Luria says that last year, concerns about the Chinese government cracking down on bitcoin usage created noise that depressed the bitcoin price. This year, the failure of Mt. Gox "caused some people to lose faith in bitcoin," he says.
"Since then, there's been a lot of optimism," Luria says.
Mark T. Williams, a master finance lecturer at Boston University who has been closely studying bitcoin, says this latest jump underscores "the price instability of this pseudocurrency." He says that because bitcoin is still relatively thinly traded, its price can be moved rapidly, simply through rumors or any bit of optimism or pessimism.
Luria and Williams say investors still should expect bitcoin to have its ups and downs, and that further developments will determine where the price goes.
"Unlike stocks (which tend to trade in a fairly narrow range), with bitcoin, it could end up being worth very little or it could be worth 100 times what it's worth now," Luria says.
I have been experimenting this year with buying and using bitcoin (story to come later). Anyone out there own any bitcoin? Where do you think the price is headed?
And if you're tired of hearing about bitcoin but want to know more about cryptocurrencies, check out some of the altcoins that are floating around.
Follow me on Twitter: @allisonsross.