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: The U.S.Securities and Exchange Commission (SEC) deciding to reject a bitcoin exchange-traded fund (ETF) proposed by Cameron and Tyler Winklevoss.This is now under review however.An ETF would have given further credibility to bitcoin and helped more institutional investors get involved.A fierce debate over the future of bitcoin's structure.The full explanation can be read here.

Issues with some exchanges, particularly Bitfinex, which cut off their access to the banking system meaning customers couldn't make withdrawals in fiat currency.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.bitcoin stealing virusSo-called miners, using high-powered computers work these solutions out to determine if the transaction is possible.bitcoin future scopeOnce other miners also check the puzzle is correct, the transactions are approved and the miners are rewarded in bitcoin.bitcoin path to walletBut there is a big backlog in transactions and the speed at which these are processed is slowing.bitcoin millionaire play storeThat's because the rules of bitcoin only allow a certain amount of transactions through in one block.bitcoin boden

In mid-March, the price of bitcoin saw a big drop because the community was afraid of a so-called "hard fork" which could have led to two blockchains forming, and therefore two separate cryptocurrencies.bitcoin pool share difficultyBut the example of litecoin shows that a so-called "soft fork" can happen which would increase the block size for bitcoin without major disruption.bitcoin value graph euro"That example of a successful soft fork in litecoin has made people start to think that we could get a successful SegWit implementation in bitcoin and that could increase capacity and move us to the next level," Daniel Masters, director at Global Advisors Bitcoin Investment Fund (GABI), told CNBC by phone.bitcoin collect incGABI is an investment fund that is listed on The International Stock Exchange on the Channel Islands.bitcoin graph inr

And what does this mean for price?While bitcoin has seen a recent rally, previous peaks have seen sharp pullbacks in prices.Masters said the price rise has been "violent in the short-term" with bitcoin "fully valued for the moment".This could lead to a pullback to around $1,100.However, the long-term outlook remains strong."In the 8- to 14-month horizon, my forecast would be around $4,000," Masters told CNBC.Others also expect high prices.Gatecoin's Menant said prices should climb beyond $3,000 this year.Cryptocurrency markets have been going through a wild ride for a few weeks now.The threat of a bitcoin hard fork together with PoS expectations on Ethereum and the rise of zero-knowledge have rocked the markets.Investors flocked into Dash, Ether, Monero and other lesser known cryptocurrencies, abandoning bitcoin and overlooking Litecoin.That changed over the weekend, when Litecoin prices surged suddenly to above $8 USD.No one can say with certainty why this happened, but there are a few plausible explanations.

The first and most obvious explanation about why Litecoin prices surged lately, has to do with reports about SegWit signaling on its network.Litecoin works in a very similar way to bitcoin, which means it also faces some of the transaction issues that bitcoin faces.Although Litecoin transactions are supposed to be at least 4 times faster than those on the bitcoin network, because a new block takes ¼ of the time to mine on this network, SegWit can accelerate transactions over the Litecoin blockchain even more.This means that if Litecoin adopts SegWit soon (signaling is near the 75% threshold), it could outflank bitcoin in terms of day to day micro transaction functions.This, combined with the fact that Litecoin is the closest bitcoin substitute in the market, could add a lot of value to this cryptocurrency.Under this logic, it is easy to claim that Litecoin is in fact undervalued even after the most recent surge.This should give its price more room to grow at least in the following days.

The other possible explanation for the recent rise in Litecoin prices could be related to SegWit signaling.Reports have pointed to Chinese investors pouring more funds into Litecoin lately.Chinese investors could be positioning themselves to gain from the value that SegWit adoption can bring to Litecoin.It is also possible that they would like to put their money in a cryptocurrency that up until now has not attracted the same degree of attention that bitcoin has, due to crackdown threats from local authorities.Apart from the SegWit and China angles, there are some other reasons why Litecoin might be pulling up now.Investors might be looking for stability.This sounds like a simple explanation to a puzzling phenomenon.Litecoin prices have been some of the most stable – if not the most stable – cryptocurrency prices for a long time.But then, the question would be why did investors wait until now to seek refuge in a more stable asset?High risk/high reward moves based on unique information might be the answer to that question.

While the markets were in turmoil and bitcoin dipped to just over $900 USD, investors made aggressive moves into other cryptocurrencies that have some innovative or exciting characteristics.Investors moved into zero-knowledge assets and assets that power smart contracts.Moving away from a bitcoin-like asset was the right move back then.Once the market was saturated, it was time to capitalize and move back to a bitcoin-like asset that doesn’t have the kind of political problems that bitcoin does.An asset that fits that description provides some degree of stability, and its name is Litecoin.Now Litecoin must solidify these gains.It must go beyond a “the closest to bitcoin” tag and carve its own niche in the market to sustain its gains.The potential is there.Of all the major cryptocurrencies, Litecoin is the only one this year that has not surpassed its previous all-time high – around $50 USD.SegWit adoption will probably take Litecoin prices a step closer to this goal, but greater consumer adoption will be the key factor going forward.