Bitcoin could rally nearly 40 percent to hit $6,000 before the end of the year but investors should brace for more volatility, according to industry experts.
The cryptocurrency was trading around $4,333 on Tuesday.
The third quarter has been one of the most eventful in bitcoin's history. It is up over 74 percent in the September quarter, with a shifting landscape in regulation and developments in the underlying technology taking place in the last three months.
Here's what has happened so far and what experts think is coming next.
Infighting and split
Bitcoin faced record-high transaction times due to congestion on the network. To solve that, the amount of data that could be processed in one transaction needed to increase. But the community was divided on how to solve this.
This resulted in a "fork" earlier this year that split bitcoin in two. Bitcoin remained, but a new crytocurrency called bitcoin cash was created.
On the core bitcoin network, an upgrade known as SegWit2X was implemented, which would help increase the transaction speed. The full back story can be read here.
Bitcoin's market cap is about 10 times that of bitcoin cash. Since it started trading at the beginning of August, bitcoin cash has risen to nearly $900 before falling to current levels of around $402, according to Coinmarketcap.com.
Shift of power to Japan
China was once the dominant driver of the bitcoin price. But regulators in the country have been cracking down on the cryptocurrency, banning so-called initial coin offerings (ICOs) where companies raise money through cryptocurrencies.
China's major bitcoin exchanges OKCoin, Huobi and BTCChina have halted trading for customers on the mainland. At the start of the quarter, Chinese yuan accounted for around 17 percent of bitcoin trade globally, according to industry website CryptoCompare. By the end of the quarter, it was less than 3 percent.
Meanwhile, Japan has been more open to cryptocurrencies. Regulators there legalized bitcoin and major retailers have begun accepting it as payments. And last week, Japan's Financial Services Agency (FSA) officially recognized 11 companies as registered cryptocurrency exchange operators.
CNBC reported that major Japanese banks are looking into creating their own digital currency called the J-Coin, with backing from major institutions.
The third quarter also saw bitcoin hit an all-time high of $5,013.91, according to data from CoinDesk.
Regulatory support in some markets, as well as rising interest from institutional investors, has helped boost the value.
$6,000 bitcoin in sight?
"Throughout the year we've been predicting the bitcoin price will surpass $5,000 and creep closer to $6,000 by year's end. That prediction is looking more in line with market sentiment these days," Thomas Glucksmann, head of APAC business development at Gatecoin, a cryptocurrency exchange, told CNBC by email.
But he warned investors to get ready for more volatility in November. This is because some in the bitcoin community might move to reject SegWit2X. This could create another split in bitcoin, and potentially create another cryptocurrency.
Charles Hayter, CEO of industry website CryptoCompare, said that bitcoin could hit $5,000 by the end of the year. This will be supported by increased regulation to cryptocurrencies and ICOs.
"Bitcoin's biggest price catalyst is regulation. Japan has breathed life into the price and as the fog of uncertainty clears in other jurisdictions, clarity on regulation will release a break on the price," Hayter told CNBC by email.
Arjun Kharpal Technology Correspondent
Arjun Kharpal is a technology correspondent for CNBC in London. He moved into the role after being a news assistant at the company for two years, and a reporter for a year following that.