The value of Bitcoin has reached a record $20, after a volatile few years.

The cryptocurrency, which caused a ‘gold-rush’ style surge of investments in , rose by more than 6 per cent on Wednesday to reach $20, (£15,) against the dollar.

It has seen a rise of more than per cent this year, after a low point of $3, in March.

But why has this happened in such a rocky year? Here’s everything you need to know.

What is Bitcoin?

Bitcoin is the leading digital currency and it has soared in value since launching with a value of less than 10 cents in The price was fairly stable until , when it rocketed from less than $1, at the beginning of the year to come close to $20, at the end of December  

Since then the price has fluctuated significantly, but it has been steadily climbing this year.

Bitcoin has experienced a 52 per cent boom since the start of September.

For those who invested and sold at the right time, bitcoin has been a lucrative investment. In December last year, Bloomberg declared it to be “the decade’s best-performing asset”, having yielded early investors an eye-watering 9,, per cent rate of return on its starting price. 

Bitcoin’s success led to the rise of other digital currencies such as ether, litecoin and ripple, but it remains the most popular and recognisable.

Why has the value risen?

The price surge appears to be driven by institutional investors, who are starting to view bitcoin as a safe investment for the future.

Nigel Green, the chief executive of deVere Group, a finance company which operates a bitcoin exchange, said: “They’re being attracted by the good returns that the digital asset class is currently offering but, more importantly, by the huge future potential it offers.

“As some of the world’s biggest institutions – among them multinational payment companies and Wall Street giants – pile ever more into crypto, bringing with them their enormous expertise and capital, this in turn swells consumer interest.”

It is thought the public’s interest in it will be piqued again after the rise.

Ayush Ansal, the chief investment officer of Crimson Black Capital, a hedge fund, said: “After being in a wasteland since the infamous bull run of late , crypto, and bitcoin in particular, are back.

“Bitcoin has been threatening the symbolic $20, barrier for some time and finally it has broken through.”

Simon Peters, an analyst at investment platform eToro, told This is Money last month: “There are a whole host of factors contributing to the current price rise. 

“This includes a massive influx of investors from large scale institutions such as listed investment trusts, pension schemes and university endowment funds, which shows how far bitcoin has come.”

JP Morgan analysts have said people who previously invested in gold are seeing bitcoin as a modern alternative.

There are similarities between the two, as there is a finite supply of both. Bitcoin is limited to 21 million coins.

Russ Mould, investment director at AJ Bell, explained: “Bitcoin’s finite supply may make it attractive to those who feel their need to preserve their wealth in the face of rampant growth in money supply.”

That “rampant growth in money supply” can be directly linked to the coronavirus pandemic, with central banks pumping billions into economies to help them recover from the effects of enforced lockdowns.

Where does the price go from here?

Bitcoin is famously volatile, which means it is hard to know what will happen next.

However, recent developments have given it some more stability. In October PayPal – which has almost million users – announced it will allow customers to store and spend bitcoin within its service from early

Ruffer Investment Management is also rumoured to have moved $ million into Bitcoin, while fund MicroStrategy has bought somewhere in the region of $ million of bitcoin this year.

Search trends show regular consumers are also starting to show interest in bitcoin again, suggesting the price could continue to rise.

However, some have warned investors to be cautious.

“History has a warning for people buying at the new all-time-high,” financial author and trading veteran Glen Goodman told Forbes.

“While I’m optimistic about the long-term prospects for bitcoin, four years ago we had a very similar situation with bitcoin breaking new ground, but just two weeks later its price plummeted by more than a third.

“History doesn’t always repeat itself, of course, but the lesson is to be on your guard. The market often teaches harsh lessons in humility to those who risk too much on what they’re told is a sure thing.”