Bitcoin climbed again above $18,000 final week to flirt with record levels, a spectacular rally pushed by a brand new group of patrons searching for the chance for giant earnings.

The digital foreign money traded as excessive as $18,965 on Friday, in line with CoinDesk, about 4% beneath its all-time excessive of $19,783 set in December 2017. It has surged greater than 50% up to now month alone.

The rally has attracted a large forged of characters, from the Wall Road billionaires Paul Tudor Jones and Stanley Druckenmiller to momentum traders who goal to experience profitable property greater and dropping markets decrease.

Their participation, in flip, has fueled extra shopping for, which mirrors an analogous dynamic taking part in out in shares reminiscent of
Tesla Inc.,
which traders preserve pushing greater with little regard for fundamentals. As in 2017, when bitcoin grew to become a cultural phenomenon, a lot of the hype has traveled by word-of-mouth.

These days, bitcoin has even been a profitable subject on sports activities radio. Gregg Giannotti, co-host of the “Boomer & Gio” morning sports-talk radio present on WFAN in New York, has been speaking up the cryptocurrency on the air after investing $10,000 earlier this month.

There was a powerful response to the bitcoin segments, Mr. Giannotti mentioned. “As quickly as I introduced it up on the air, it began,” he mentioned, including that outdated mates wrote to him, gross sales individuals wished to speak about bitcoin and listeners jammed his Twitter feed. “It struck a nerve,” he mentioned.

Bitcoin, a type of cash that exists solely digitally, started in January 2009 during the depths of the financial crisis and was positioned as a substitute for government-backed cash. It operates throughout a community of linked however impartial computer systems that may’t be managed by anybody celebration, reminiscent of a central financial institution.

It was designed to have a hard and fast provide that may make it proof against inflation. With central banks pledging this yr to push up inflation, extra traders have been prepared to check bitcoin as a hedge. Its potential, nonetheless, has been tough to gauge as a result of inflation hasn’t reached the Federal Reserve’s goal of two% in years.

Aiding this curiosity has been the rising variety of mainstream platforms that facilitate bitcoin buying and selling. The mix of accessible platforms and bitcoin’s potential as an inflation hedge is what’s primarily driving the cryptocurrency this yr, mentioned Dan Morehead, chief government of Pantera Capital, a enterprise fund that has been investing within the sector since 2013.

“Paper cash is being debased, and bitcoin is just not,” he mentioned.

The final time bitcoin attracted such consideration—within the fourth quarter of 2017, when it almost quadrupled to method $20,000—the trade wasn’t ready. There have been few shops for buying and selling past startup exchanges, and bitcoin had little sensible worth. The momentum washed out, new traders disappeared, enterprise capital dried up and the trade went by way of a wave of retrenchment and layoffs.

A lot of that has modified, bulls argue. For one factor, the regulatory panorama is far clearer than it was in 2017. State and federal businesses, together with the Inner Income Service and the Securities and Trade Fee, have laid out guidelines for the remedy of cryptocurrencies. That has led corporations reminiscent of
CME Group Inc.,
Intercontinental Exchange Inc.
and Constancy Investments Inc. to supply providers for getting and promoting crypto property.

There are additionally retail-oriented platforms catering to curiosity in crypto buying and selling. Quantity has surged at
Square Inc.’s
Money App, which has allowed clients to purchase and promote bitcoin since 2018. Within the third quarter, clients purchased $1.6 billion of bitcoin, up from $555 million the yr earlier than.

In October,
PayPal Holdings Inc.
unveiled a service that enables its customers to purchase and promote bitcoin immediately of their accounts. It grew to become accessible to all U.S. customers on Nov. 12 and can develop to Venmo and a few worldwide markets subsequent yr.

Grayscale Investments, a personal fund supervisor that sells 10 over-the-counter belief funds centered on bitcoin and different cryptocurrencies, has benefited from the brand new curiosity. The agency reported Tuesdaythat its property underneath administration had risen to greater than $10 billion from $5.9 billion on the finish of September.

Regardless of the current progress, the bitcoin market remains to be tiny in contrast with different property, which contributes to its volatility. Pantera estimated that buying and selling volumes on PayPal and on Sq.’s Money App alone would exceed the quantity of recent bitcoin being created each day.

With hedge funds and different professionals additionally shopping for, provide will turn out to be much more constrained, in line with Pantera Capital’s Mr. Morehead. “The one approach provide and demand equilibrates is at a better worth,” he mentioned.

That dynamic is a part of what attracted Mr. Druckenmiller. He sees bitcoin as just like gold, he instructed CNBC in an interview earlier this month, however due to bitcoin’s smaller dimension and volatility, he believes it may outperform the valuable steel. Mr. Jones instructed the community in Might that he put about 1% to 2% of his property in bitcoin, calling it a “nice hypothesis” that he believes will emerge as a brand new asset class.

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Neither Mr. Druckenmiller nor Mr. Jones responded to requests for remark.

Nonetheless, bitcoin’s historical past reveals precisely how risky and dangerous it may be for traders. Its worth fell as little as $3,867 on March 13, when international markets cratered, a drop of greater than 60% from the start of the yr. Bitcoin misplaced about 50% of its worth in January 2018 after the spectacular 2017 run, finally sinking to as little as $3,122 by December 2018.

These dangers haven’t deterred traders reminiscent of Wayne Sharp, a retired funding adviser in Columbus, Ohio, who purchased her first bitcoin in September, investing $10,000. She mentioned she was swayed by arguments about bitcoin’s worth as an inflation hedge, in addition to the respectability conferred by traders together with Mr. Jones.

She acknowledged the acquisition was speculative however mentioned she is uninterested in watching safer, “worth” investments fall behind momentum trades. She put a small quantity of her wealth into the cryptocurrency and mentioned she may purchase extra down the street.

“I determine what the heck, simply go for it,” she mentioned.

From the Archives

In an authentic WSJ documentary, markets reporter Steven Russolillo ventures to Japan and Hong Kong to discover the universe of cryptocurrencies. His mission: create WSJCoin, a digital token for the newspaper trade. Picture: Crystal Tai. Video: Clément Bürge (Initially Revealed October 3, 2018)

Write to Paul Vigna at [email protected] and Anna Hirtenstein at [email protected]