Bitcoin, the mysterious cryptocurrency that almost no one understands, has surged in value over recent weeks, making a number of savvy, or lucky, investors a lot richer.

And it’s not just punters who’ve noticed the dramatic price rise. The Standing Committee on Tax and Revenue, in the lower house of Parliament, is taking a closer look at the digital currency and its tax implications.

Parliament is also expected to vote this week on a bill to give AUSTRAC, the financial regulator, powers to police digital currencies like bitcoin, in order to prevent money laundering.

While critics say the gravity-defying rise is nothing more than a bubble waiting to burst, others argue it could continue just about indefinitely.

Since January 1 this year, the value of a single bitcoin has sextupled – i.e. grown six times.

If you’d bought one bitcoin for $US1000 on January 1, you could have sold it on Tuesday for $US6000 (or $A7700).

That’s an unthinkable 500 per cent return on capital, and an extra five grand for nothing.

To put that in perspective, so far this year the ASX 200 has returned just over 4 per cent.

So if you put the equivalent of $US1000 in Australia’s biggest 200 companies in January, it would now be worth $US1040 (or $A1330).

Endless growth or bubble?

For investors wondering whether to jump on the bandwagon, the key question is, can the growth continue?

As with most currencies, bitcoin’s value is based largely on sentiment. If people think it’s worth a lot, it is – and vice versa.

But unlike most currencies, bitcoin is not linked to a particular country with a particular central bank influencing its value, and a particular government and economy behind it.

This last factor means it is much less constrained than conventional currencies, making its movements hard to predict.

Bitcoin’s harshest critics say its untethered nature make it ultimately worthless. Most prominent among these is Jamie Dimon, CEO of American banking giant JP Morgan.

At a conference in September, Mr Dimon insisted that bitcoin was “not a real thing” and would prove to be “the emperor’s new clothes”.

JP Morgan CEO Jamie Dimon has no confidence in bitcoin.

He said its current value was driven solely by speculation. “That isn’t a reason to say something has value – because other people are speculating on it.”

He said governments were tolerating it now, but this would change.

“Wait until someone gets hurt, wait until it’s used for illicit purposes. They [governments] will close it down.”

But even Mr Dimon conceded the cryptocurrency could go a lot higher – as far as $100,000 – before it came crashing down again.

Bitcoin converts, on the other hand, argue its recent rise in value is a result of growing confidence that the currency is a safe and credible part of the financial landscape.

One of these is Daniel Alexiux, CEO of Brisbane-based fintech company Living Room of Satoshi, which enables consumers to pay their bills with bitcoin.

He told The New Daily that if bitcoin were to achieve its goal of becoming a global currency, it would need to increase in value a lot more.

“There can only ever be 21 million bitcoins (or 21 quadrillion satoshis), and if we multiply that by the current price, we get to a total market cap of almost $US100 billion,” he said.

“For a system with aspirations to be a global currency, and be used as the de facto means of exchange on the internet, $US100 billion is still a very small amount. The market cap will need to increase to a far higher number than this to support global trade.”

If bitcoin wants to compete with the US dollar as a global currency, it would need to increase its value 100 fold – something Mr Alexiux said was not beyond the realms of possibility.

Mr Alexiux said his firm had seen a huge increase in business in the past year. He said users were now paying half a million dollars worth of bills a week in bitcoins through Living Room of Satoshi.

He also said some businesses were starting to pay their staff in part with bitcoin.

And unlike Mr Dimon, he said more government regulation was a good thing, as it would help increase confidence.

Views expressed in this article should not be treated as financial advice.