Cloud Hosting

Bitcoin is "fully valued" and could see a pullback in the short term after hitting $1,600 for the first time on Monday, according to one investor, but the price could go as high as $4,000 over the next 14 months.

The cryptocurrency has been on an upward move since April and was trading around $1,575.52 by early afternoon trading in London after hitting an all-time high $1,601.05 during morning trade, according to the Coindesk bitcoin price index.

In the last 30 days, bitcoin has risen over 33 percent.

Negative bitcoin news

The rally may seem perplexing given that there have been a number of setbacks for the cryptocurrency.

These include:

So why the rally?

At the same time, there have been some positive developments.

Firstly, Japan legalized the cryptocurrency as a payment method recently and this has led to a greater amount of bitcoin being bought with yen, according to Aurelien Menant, founder and CEO of Gatecoin, a regulated blockchain assets exchange based in Hong Kong.

The second reason could be to do with a change in the code of another cryptocurrency called litecoin.

What happened with litecoin and why does it matter to bitcoin?

Last month, there was a change in the code behind the technology that underpins litecoin. It is known as Segregated Witness (SegWit) and it allows the speed of transactions using the cryptocurrency to increase.

This has given hope that bitcoin could see a similar thing.

Fork debate recap

To understand the issue, it's key to look at how bitcoin transactions are processed. Transactions by users are gathered into "blocks" which is turned into a complex math solution. So-called miners, using high-powered computers work these solutions out to determine if the transaction is possible. Once other miners also check the puzzle is correct, the transactions are approved and the miners are rewarded in bitcoin.

But there is a big backlog in transactions and the speed at which these are processed is slowing. That's because the rules of bitcoin only allow a certain amount of transactions through in one block.

See more here:
Bitcoin hits $1600 for the first time and one investor says it could rally to $4000 in a few months - CNBC