There are several reasons for the recent price rise. Regulators in the U.S. and Russia are looking into bitcoin and the blockchain (the technology that underpins the currency), while the Securities and Exchange Commission is reviewing a decision regarding a bitcoin-based exchange traded fund.
More significantly, Japan decided in April to recognize bitcoin as a legitimate currency, which has led to a surge in demand for bitcoin, especially from institutional investors looking for assets offering growth.
As a result, there's a "tidal wave" of long term investment flooding into bitcoin, according to Pavel Matveev, co-CEO at blockchain personal finance platform Wirex. He says Japanese savers are frustrated as Abenomics, the Japanese Prime Minister Shinzo Abe's economic plan, has failed to deliver an end to two decades of deflation.
"Savers have nowhere to put their money," he told CNBC in an email on Tuesday.
"Bitcoin on the other hand has outperformed every traditional currency by a near astronomical margin," he added. "Now that Japan's biggest financial institutions are embracing bitcoin, we are in blue sky territory in terms of valuation."
Matveev has previously predicted bitcoin reaching $3,000 by the end of the year.