"Once these funds hit the market, what do you think the price will do? This is nothing like I have ever seen before. I have never seen so much greed and fear of missing out."
Analysts have put the latest frenzy of activity down to the imminent launch of two bitcoin futures markets, after the Chicago Board Options Exchange (CBOE) and Chicago Mercantile Exchange (CME) both obtained regulatory approval.
Bitcoin futures, through which investors can bet on the rise or fall of the digital currency, will add a layer of regulatory oversight and allow larger institutional investors to begin pouring money into the sector.
"Onwards and upwards," IG chief market strategist Chris Weston wrote. "And while a wall of money flows into this market every single day it seems the launch, this weekend, of the CBOE futures offering is being taken as a positive and not one where suddenly traders have a new avenue to short bitcoin.
"Hedge funds do not short a market that is flying — it makes no sense. However, when price does turn and there is confusion, even panic and the bid dries up, then watch the short sellers come out in droves and this is only going to mean downside moves, when they happen, could be even bigger from here on in."
Chanel said while there would "undoubtedly be small corrections along the way", there was a good chance bitcoin would touch $US16,000 by the end of the year and he "wouldn't be surprised" if bitcoin reaches $US40,000 by next year.
But he warned that there would "most certainly" be a correction "once the hype slows down".
"Currently through most exchanges, in order to buy any cryptocurrency, you have to buy bitcoin first," he said.
"Imagine if you had to buy Google or Apple shares in order to buy any other shares on the market.
"Is this likened to the dotcom bust? ... The blockchain technology is going to have a similar impact on the market like ... the internet did several years back."
While a growing number of merchants are accepting bitcoin as payment, the vast majority of interest in the cryptocurrency is undeniably as a speculative asset rather than a tool for day-to-day commerce.
On Wednesday, the world's largest online game store Steam said it would "no longer support bitcoin as a payment method on our platform due to high fees and volatility in the value of bitcoin".
According to Steam parent company Valve, transaction fees associated with bitcoin payments — passed on by third-party platform Bitpay — had surged from about 20 US cents when it first offered bitcoin payment last April to US$20 ($29.17) last week.
"Unfortunately, Valve has no control over the amount of the fee," the company said in a statement.
"These fees result in unreasonably high costs for purchasing games when paying with bitcoin. The high transaction fees cause even greater problems when the value of bitcoin itself drops dramatically."
