How exactly did we arrive at this bitcoin phenomenon?

Silicon Valley’s obsession with cryptocurrencies requires no more evidence than the incredible rise of bitcoin, the alternative currency that crossed $10,000 USD in value on Tuesday in what is a watershed moment for the nine-year-old cash substitute.

Bitcoin has now doubled in value over the last three months — a run fueled by new interest from institutional investors like venture capital firms but also old passion from longtime enthusiasts for a once-niche payment platform.

“You’re seeing a wall of capital moving in — and if you’re looking at the fundamentals, it’s pretty stable underneath,” said Miko Matsumura, who founded a cryptocurrency exchange and has invested in several funds and startups centered around bitcoin. “You can’t have the phenomenon without both sides.”

Behind its rise is also a desire by global investors to hedge against any possible depreciations in their own currencies. Institutions nervous about money backed by fiat are naturally attracted to an open source currency that is less influenced by macroeconomic fluctuations or geopolitical risk.

But to say concerns about a bubble persist would be a massive understatement. It has crashed — hard — several times before, thanks usually to new crackdowns from China. Bitcoin’s pace of growth — plus the mere fact that as a digital currency it is not backed by a government or an army — makes more than a few analysts worry that this craze is due for another crash.

For now, though, it’s on a warpath worth some awe.

Courtesy Recode