It seems like everyone wants a piece of Bitcoin.
The price is up 42% since the beginning of the month and at its highest level since early 2014, while its market capitalization has jumped to $12 billion from $8.3 billion. That is a big move for any currency, digital or conventional.
China is the biggest Bitcoin player.
As reported in The Wall Street Journal, 92% of all Bitcoin trades are done through Huobi and OKCoin, two Chinese Bitcoin exchanges.
Bitcoin is cryptocurrency, digital money that is created and stored via the blockchain database, which maintains a continuously growing list of data records that protect against revision and tampering.
Unlike conventional currencies, no government controls the Bitcoin network. Also, unlike paper currencies, the total number of Bitcoin units is limited to 21 million.
But, just like dollars and euros, Bitcoin can be used to buy things. Several online stores now accept Bitcoin as payment, and there are even Bitcoin ATMs.
Bitcoin transactions are secured by a network of miners. They are paid in Bitcoin when they mine a block, which is a fairly complex process.
When 210,000 Bitcoin blocks are mined, the value of mining new Bitcoins is halved. This has only happened once in the history of Bitcoin -- all eight years of it -- in November 2012.
The next halving is expected to happen next month. This will cut the mining fee to 12.5 Bitcoins from 25.
Some investors think that this halving will reduce the supply of Bitcoin, and that is one possible reason for the recent spike in prices.
It may also stem from the fact that Bitcoin's blockchain technology is growing in popularity among commercial users. This would also lead to an increase in demand for Bitcoin, causing the price to rise further.
Also, Bitcoin is perceived by some investors as a safe-haven asset, a digital version of gold. With concerns over the referendum this week on whether the United Kingdom will leave the European Union, some may be parking their money in Bitcoin until the storm passes.
China is also driving this rally.
The yuan, which is down more than 6% against the dollar since August, and a slowing economy are two reasons that an estimated $1 trillion in capital left China last year. Private citizens and corporations are taking their money out of China and investing it in other more stable countries or buying dollars.
But China's government is trying to control the outflow.
One strategy is to restrict how much money individuals can move out of the country each year. The limit is $50,000 per year.
But there are several ways to bypass this rule, and one of them is to use Bitcoin.
Bitcoin is becoming a popular way to anonymously move money out of China. For a 1% to 2% fee, a Chinese citizen can deposit yuan in a Bitcoin account and then go overseas and withdraw it in a different currency.
Because Bitcoin prices can be volatile, there is a chance that Bitcoin values will change while this transaction is in progress. So, there is the potential to lose money.
But it is a fairly simple way to beat the system the Chinese government has put in place.
The main reason for Bitcoin's price surge, however, is classic speculation.
Recently, there have been short-lived bubbles in a range of assets, including cotton, eggs and iron ore, all as a result of speculation by Chinese investors. And now it is Bitcoin's turn.
All these booms have followed the same pattern: skyrocketing prices due to speculation, followed by a crash once the frenzy was over.
Bitcoin prices could go higher, though. Bitcoin prices surged in 2013 to even higher levels now.
Back then, one Bitcoin could be purchased for $12 and then sold on Nov. 29, 2013, for $1,100, for a 9,000% gain.
If this Chinese-fueled speculation continues, and if the yuan tumbles, it is entirely possible that Bitcoin could reach 2013 levels again, which is another 50% higher than where Bitcoin is trading.
In April, China had capital outflows of $45 billion, according to the Royal Bank of Scotland.
That is a lot of money for one month. But compared with last year, when about $83 billion was leaving each month, it is pretty moderate.
If the yuan devalues and just part of the outflowing capital is used to buy Bitcoin, prices of the cryptocurrency could reach historic highs.
However, don't assume that this bubble is any different from previous ones. When it pops, many speculators will regret ever having thought of a digital currency as a safe haven.
Kim Iskyan is the founder of Truewealth Publishing, an independent investment research company based in Singapore. Click here to sign up to receive the Truewealth Asian Investment Daily in your inbox every day, for free.
This article is commentary by an independent contributor.