The cryptocurrency has gained over 170 percent this year, buoyed by demand from larger investors.

A Bitcoin (virtual currency) is seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, June 23, 2017.
A Bitcoin (virtual currency) is seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, June 23, 2017. (Reuters)

Bitcoin has smashed through $20,000 for the first time, its highest ever.

The cryptocurrency jumped 4.5 percent to move as high as $20,440 in Wednesday trading.

It has gained more than 170 percent this year, buoyed by demand from larger investors attracted to its potential for quick gains, purported resistance to inflation and expectations it will become a mainstream payment method.

Bitcoin’s blistering rally has seen a massive flow of coin to North America from East Asia, fuelled by hunger for bitcoin among bigger and compliance-wary US investors.

The rally in bitcoin, which some investors have seen as a potential safe-haven, has coincided with spot gold’s drop in recent months.

Some investors such as hedge funds and family offices have in the past been deterred by the opaque nature of the crypto market. Tightening oversight of the American crypto industry has helped soothe some of those concerns.

READ MORE: Bitcoin surpasses $18,000 amid rising demand for cryptocurrency

Volatile history

Bitcoin's 12-year history has been peppered with vertiginous gains and equally sharp drops. Its markets remain highly opaque compared with traditional assets such as stocks or bonds.

Its rally this year has prompted some investors to claim the cryptocurrency could more than quintuple in price to as high as $100,000 in a year, drawing eye rolls from skeptics who say it is a purely speculative asset.

"The latest run in bitcoin ... has been fuelled by the lack of supply-side liquidity, especially on exchanges," said Jacob Skaaning of crypto hedge fund ARK36, adding that the volume of bitcoin on trading platforms was down amid high demand.

Cryptocurrency markets have matured since bitcoin's retail-fuelled rally in 2017, attracting bigger investors.

READ MORE: Inflation-hedge, risk-on bet: What’s behind bitcoin’s 2020 rally?

Source: Reuters