Cryptocurrencies have experienced a sudden and unexpected price surge, following months of market decline.

Bitcoin, the world’s most valuable, shot up in value by almost a quarter in the space of 48 hours, reaching as high as $3,950 (£3,120) on Wednesday before losing $100 and slipping back to $3,850 (£3049).

Other leading cryptocurrencies experienced even larger gains, with bitcoin spin-off bitcoin cash rising by 64 per cent since the weekend. 

Cyber security pioneer John McAfee, who is now one of the most prominent figures in the cryptocurrency space, said the price gains could suggest a more significant market shift.

“Bitcoin at $3850. Tide may be turning. Altcoins accelerating even faster,” Mr McAfee tweeted. “Today’s winner is Skycoin: up 45 per cent. My Skycoin tattoo was prophetic. It takes time, but the coins I choose, eventually, tend to win. Keep your fingers crossed folks. Last week may have been the time to buy.”

Cryptocurrency analyst Mati Greenspan said there was a simple explanation for the dramatic price reversal.

“For those wondering what’s causing crypto’s impressive push from the floor this morning, look no further than short covering,” the senior market analyst at online trading platform eToro, told The Independent. “People are looking to reduce their exposure and closing out high risk sell positions before the holidays and this is creating upward pressure on market prices, which is ultimately resulting in a rally.”

The price of bitcoin shot up by more than $500 in just two days (CoinMarketCap)

The dramatic price gains come at the end of a disappointing year for Bitcoin, having traded at close to $20,000 (£15,850) in December 2017.

The wildly fluctuating price is not unusual for the notoriously volatile cryptocurrency, with five previous cycles seeing bitcoin fall by an average of 85 per cent each time.

Before the latest recovery, the price of bitcoin was around 83 per cent down on its 2017 high.

Is bitcoin’s bleak mid winter about to turn into a Christmas miracle? (iStock)

Opinion is divided over whether bitcoin will return to its previous highs, with some analysts suggesting that bitcoin will eventually become worthless. 

Others are more positive in their forecasts, including Mr McAfee, who famously predicted that one bitcoin will be worth $500,000 (£396,000) in 2020.

“If not, I will eat my d**k on national television,” he tweeted in July 2017. At the time, one bitcoin was worth around $1,800 (£1425).

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