Bitcoin: $500 to $900 and back ... in a day!

November 19, 2013: 1:01 PM ET
bitcoin prices 111813
The price of the currency soared nearly from a little over $500 early Monday to an all-time high of $900.98. By Tuesday morning, it had plunged back down again to a level just above $500.
NEW YORK (CNNMoney)

As investors, technophiles and lawmakers debate the legitimacy of Bitcoin, one thing's for sure: the fledgling digital currency is on the roller coaster ride of a lifetime.

Within a 28-hour period stretching from Monday morning to early Tuesday, the price of the currency soared nearly 70%, from a little over $500 to an all-time high of $900.98 .. before plunging back down again to a level just above $500. (Bitcoins trade 24/7 online.)

By midday Tuesday, Bitcoin was back above $700, a 50-fold increase since the beginning of the year, when a single Bitcoin was worth around $13.

The latest surge in Bitcoin has been fueled by investors, particularly those in China, betting on the future growth of the currency as a credible alternative.

Related: Senate takes a close look at Bitcoin

Bitcoin was created anonymously in 2010 as an experimental form of money that exists only online. It is not managed by any central authority and is "mined" by solving complex math problems using powerful computers.

The algorithm behind the virtual currency caps the total number of Bitcoins at 21 million. Currently, there are almost 12 million Bitcoins in circulation, giving the currency a total market value of almost $8.5 billion.

Related: Bitcoin's tipping point

Twins Tyler and Cameron Winklevoss, who have said they believe Bitcoin will be a better long-term bet than gold and have filed paperwork to create launch a Bitcoin exchanged traded fund, predicted that the Bitcoin market could be worth up to $400 billion.

How I make money mining bitcoins

Though Bitcoin has been gaining traction among investors and even consumers, government officials worry about the lack of regulation for the digital currency, especially since it's been commonly used for anonymously buying drugs and other criminal activity.

Related: Donate to typhoon victims ... with Bitcoin

The FBI recently shut down Silk Road, an online black market for illicit drugs that primarily used Bitcoin.

But an official from the Justice Department told lawmakers on the Senate Committee on Homeland Security and Government Affairs Monday that the DOJ still needs more help catching criminals who use digital and mostly untraceable currency.

The Senate Committee on Banking, Housing and Urban Affairs will hold a Bitcoin hearing later Tuesday.

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