Bitcoin climbed to over $1,000 after tumbling to below $950 over the weekend, losing one-fifth of its value. The cryptocurrency hit a low of $943.06 after news of a split in its developer community. Investors fear the split may threaten the future of bitcoin.
Developers threatened to establish a "hard fork," an alternative bitcoin marketplace. The newly established platform would be incompatible with the current one, creating two versions of the currency. One version, bitcoin unlimited, is gaining increasing support.
Once the baseline of support reaches a certain threshold, those running bitcoin software will need to adopt bitcoin unlimited or be shut out of the bitcoin network.
The cryptocurrency soared to an historic high of $1,350 on the Bitstamp exchange last week amid heightened speculation that regulators may approve the first bitcoin exchange traded fund in the U.S.
The Securities and Exchange Commission (SEC) rejected the bid for the ETF, founded by the Winklevoss twins. The SEC said the ETF would pose a fraud risk due to lack of regulation in global bitcoin markets.
Approval would have pushed bitcoin one step closer to mainstream.
Bitcoin started tumbling last Thursday and hit $944.36 on Sunday, a five-week low.
By Monday morning, the cryptocurrency had recovered slightly, climbing 2.5% to trade at $1,050.
Bitcoin's losses, experts say, were driven by concerns over how to scale the cryptocurrency to prevent delays in finalizing transactions.
Transactions are combined into "blocks." Developers have been debating for years over block size limits. Blocks currently have a 1MB size limit on processing transaction batches, but many in the industry want to increase the size to correspond with network capacity increases. Some argue that such a move would be unsafe.
Bitcoin's significant sell-off over the weekend was also driven by the rise of a rival cryptocurrency: ether. Ether is the digital currency behind Ethereum. Experts say the project has greater potential than bitcoin.
Ether's value has more than tripled over the last month, hitting a record high of $45.
Experts say investors were selling bitcoin and buying ether, driving bitcoin's value even lower.
Other cryptocurrencies also saw gains. Dash reached an all-time high of $100 on Monday, and Monero hit a high of $20.
So far, 2017 has been a volatile year for the cryptocurrency. Bitcoin gained 20% in the first week of 2017 after gaining 120% in 2016 and becoming the top-performing currency of the year.
Bitcoin crashed, falling 35%, after China announced that it was considering cracking down on trading. Despite facing some bad news, the cryptocurrency bounced back and gained more than 50%.
China's biggest exchanges announced that they would start blocking withdrawals from trading accounts and begin charging a 0.2% fee on transactions.
Despite this news, bitcoin soared to a high of $1,327 ahead of the SEC's decision to reject the Winklevoss' bitcoin ETF.
Bitcoin investors are still holding on to hope, as a few other SEC rulings are still in the pipeline. One ruling is set for March 30. Experts do not expect either one to pass.
Disclosure: Author does not have any stake in the listed securities.
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