Bitcoin continued its rise at the end of the year, jumping to a new high of more than $28,500.
The cryptocurrency gained more than 5 percent to $27,835 on Wednesday, up 47 percent since the beginning of December and is on track for its biggest monthly gain since May 2019.
Bitcoin's value has nearly quadrupled this year as interest from institutional investors grows.
As the US dollar fell, Bitcoin became a more attractive investment amid concerns that the massive government stimulus packages caused by the Coronavirus pandemic were fueling inflation.
On Wednesday, the dollar fell to its lowest level since April 2018, when measured against a basket of currencies.
The U.S. currency is under pressure as investors move to more risky assets, betting on a strong economic recovery next year with the introduction of CORONA vaccines.
Bitcoin has also been boosted by expectations that it will become the most common payment method, and PayPal has launched its cryptocurrency trading service via its platform.
It reportedly bought nearly 70 percent of all new bitcoins traded, and a number of hedge fund managers revealed this year that they had invested in cryptocurrency.
Bitcoin is described as an alternative to gold, a traditional investment as a safe haven, and gold fell after reaching a record high of more than $2,000 an ounce in August, and has now settled at $1,879 an ounce.
Some analysts expect bitcoin to compete with gold for dominance next year.
Paolo Ardoino, chief technology officer at bitfinex, said Bitcoin could attract more attention from a wider audience, not just fund managers.
"Although the growing institutional presence has been part of the current upward trend, we may see increased retail interest in Bitcoin as a form of digital gold.
Other cryptocurrencies, such as Ether, have also risen, however, there are still concerns about the speculative nature of cryptocurrencies, and regulatory problems.
Last week, the U.S. Securities and Exchange Commission accused Ripple and its top executives of misleading investors about XRP, the world's third-largest cryptocurrency, by selling $1 billion of virtual tokens without registering with the commission.
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