Bitcoin surges to $11,000 before plunging 18%, recovers from day's low

Bitcoin saw a massive, sudden spike just after it broke through a closely watched milestone Tuesday night. The cryptocurrency traded at an all-time high of USD 11,377.33, according to industry site CoinDesk.

However, shortly after reaching the milestone, the cryptocurrency plunged 18 percent to USD 9,292 on Wednesday. Bitcoin then attempted recovery and in the late afternoon and was trading around USD 9,795.

Much of that incredible gain had come in just the 12 hours after the cryptocurrency smashed through the USD 10,000 mark that many analysts had been hyping for months.

All told, it's been an exponential ascent from 6 cents seven years ago and less than USD 1,000 at the start of this year.

Since bitcoin's market capitalization is less than USD 200 billion, enthusiasts point out the digital currency could rise dramatically if it draws even a tiny fraction of the world's USD 200 trillion in traditional financial market assets.

More than 120 "cryptofunds" have launched, including some run by Wall Street veterans, according to financial research firm Autonomous Next. In another move towards establishing bitcoin's legitimacy as an asset class, the world's largest futures exchange, CME, is planning to launch bitcoin futures in the second week of December.

Former Fortress hedge fund manager Michael Novogratz predicted on CNBC's "Fast Money" in October that bitcoin would reach USD 10,000 in the next six to 10 months. As bitcoin rose above USD 9,700 Monday, Novogratz said in another "Fast Money" segment that bitcoin could "easily" be at USD 40,000 at the end of 2018.

Last Wednesday, Fundstrat's Tom Lee raised his mid-2018 price target for bitcoin to USD 11,500 from USD 6,000. That followed a similar upgrade last Monday by Standpoint Research's Ronnie Moas, who raised his 2018 price target for bitcoin to USD 14,000 from USD 11,000.

However, other market watchers remain highly critical of bitcoin. JPMorgan Chase CEO Jamie Dimon has called the digital currency a "fraud" and BlackRock CEO Larry Fink has said bitcoin is an "index of money laundering." Aswath Damodaran, a professor of corporate finance and valuation at New York University's Stern School of Business, has also noted that unless bitcoin can be used for ordinary transactions, "it could be just another fad."

U.S. dollar-bitcoin trading volume only makes up about 20 percent of the total, according to CryptoCompare. Japanese yen trading in bitcoin dominates at about 61 percent, while trading in South Korean won accounts for about 11 percent, according to CryptoCompare.