Two reasons Bitcoin just surged past $4,000

Enlarge / Bitcoin has risen 300-fold in five years. (credit: Bitcoin Charts)

The virtual currency Bitcoin hit a new record over the weekend, surging past the $4,000 mark. As of press time, one Bitcoin is worth $4,250. It's an astonishing rally for a currency that was worth $580 a year ago and has risen 300-fold over the last five years.

It's not clear what's causing the currency's value to rise so rapidly.

One likely factor: last week, the Bitcoin network officially accepted a long-debated upgrade called segregated witness. The Bitcoin network limits the size of blocks on the Bitcoin blockchain, which in turn limits the number of transactions the network can process each hour. For the last year, the network has been bumping up against this limit, leading to congestion on the network and high transaction fees. Segregated witness aims to relax this bottleneck by moving part of each Bitcoin transaction outside the blockchain, allowing more transactions to be squeezed into each block.

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