Bitcoin broke through $1,800 to a fresh record high on Thursday, and has gained more than $200 this week alone, driven by a huge jump in demand from around the world.The digital currency started off the week at around $1,555 per coin, then breached $1,700 for the first time on Tuesday before carrying on to climb above $1,800, according to Coindesk data.The price slipped today, from around $1,830 yesterday to $1772 currently.Still, the cryptocurrency is set to finish the week with a gain of around 13 percent.This accumulation has added around $2 billion to bitcoin's market cap.It currently stands at $28.86 billion.At the start of the year, the market cap was around $16 billion.Here's a chart showing the market cap growth since bitcoin began in January 2009.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.Fran Strajnar, co-founder and CEO of digital currency data provider Brave New Coin, echoes this theme.

"The world is full of cheap or free credit.There are asset bubbles everywhere from property to retail to bonds," he told CNBC via email on Friday."Lots of cheap credit is looking for new safe havens to move into and digital assets are an attractive new asset class.The volatility (of digital currencies) really doesn't matter as demand greatly outstrips supply."Strajnar predicts there may be some price corrections in the short term for bitcoin, before it begins to skyrocket."We expect some corrections but have adjusted our outlook and are now feeling that the $1200 to $1800 per bitcoin price band is a temporary consolidation period before undoubtedly climbing up to $3,800 to $8,000 over the next six months."For more reasons explaining why bitcoin prices are taking off, read this article.Bitcoin’s value is at an all-time high again.Following the hype peak and crash in 2011, many seemed to have thought it was just another dotcom fluke.But bitcoin was much more than that, and it has returned with a vengeance – its market cap is now twice what it was in the 2011 peak, and it is nowhere near its potential, which is four orders of magnitude above today’s value.

In this, a lot of people are confused at the fact that bitcoin has climbed 200% since the start of this year alone, and wonder what to make of it.It is currently at $41.50 and climbing fast, and I see a lot of people just looking at the numbers and guessing from charts how things will pan out.I am seeing guesses of $50, $100, $150, even $1,000.These numbers seem pulled out of thin air from just looking at the charts – nobody seems to have done due diligence from the other direction, from the most fundamental observation of all: Bitcoin is a transactional currency.bitcoin header formatAs such, it is competing for market share on the transactional currency market.bitcoin mining lionTalking about bitcoin value is not about happily watching numbers go up and down while having popcorn.bitcoin block fork

This is about identifying a global market, looking at its size and estimating a target market share based on the strengths and weaknesses of the competing product or service under analysis.When you know the size of the target market, and have an estimate for your projected market share, you can estimate the value of your product or service as a percentage of the value of the total market.I haven’t seen anybody do that for bitcoin.The total size of the transactional currency market is hard to estimate, but has been pegged at about $60 trillion (the amount of money in circulation worldwide).bitcoin bank robbedSeeing how this number is roughly on par with the world’s GDP, it is a reasonable enough number to be in the right ballpark.ethereum kurs euroBased on my four earlier estimates (one, two, three, four), I think it is reasonable that bitcoin captures a 1% to 10% market share of this market.bitcoin mining gpu nvidia

The low end of 1% would be if it captures international and internet trade.The 10% would be if bitcoin also manages to capture some brick-and-mortar retail trade, which we are already seeing strong signs that it might – operations provide a 3% to 5% extra profit margin on sales when you can cut out the credit card processors, so the incentive to switch is immense: those 3% to 5% cost savings translate to 50% to 100% increased profits, as margins are typically very slim in retail.litecoin price widgetFurthermore, some people will undoubtedly invest in bitcoin and keep their portion of bitcoin away from the transactional pool, like all people tend to hoard money if they are able.bitcoin cebraThis decreases the amount of bitcoin that must fulfill the market share, further driving up value for each individual bitcoin.bitcoin pending confirmations

As a rough estimate, let’s assume that only one in four bitcoins is actually used in transactions, and the rest are in some kind of savings or investment plans.This leads us to a target market cap of 600 billion to 6 trillion USD, to be fulfilled by about 6 million bitcoin, which makes for easy calculations.That means that each bitcoin would be worth $100,000 at the low market cap and $1,000,000 at the high market cap.In the light of this, present-day projections of $100 that present themselves as “daring and optimistic” actually come across as rather shortsighted and almost dealing with peanuts.So is the projected market share realistic?Bitcoin certainly has hurdles to overcome – scalability and usability being two of them – but it has done remarkably well in maturing in the two years since I started looking at it.My prediction of a mainstream breakthrough around the year 2019 remains, and it still depends on getting mainstream usability; a target market cap may be reached about a decade after that happens, as a technology typically takes ten years from mainstream breakthrough to maturity.