The price is increasing because of increased interest in bitcoin and thus demand. The more interesting question is why has interest increased so dramatically, see below. This has come up in discussions before. Some have suggested storing the password to your wallet in a safe... at a bank of all places, haha. I'll let entrepreneur, visionary and all around scammer Erik Voorhees answer that: This morning, a family member of mine asked me to write up my opinion of the Bitcoin price movement recently. For those who don't know me, I've been heavily involved in Bitcoin since May 2011. It is my full time life, my career, and my passion. The price in 2013 has been wild, and here's what I wrote to my family member. Unfortunately, while I'm certainly an insider, not even I know if the price will rise or fall tomorrow, or next week, or next month, or next year. Guessing short term price movements is a fool's game. My sentiment is the same today as it was a year or two years ago: either Bitcoin is worth zero, or is worth thousands of dollars each. It will take years for the market to figure out which it is. If you believe in the Bitcoin story, that it may revolutionize the world of finance, then it's a good idea to hold on to some Bitcoins. If you think it's just too risky, or are unconvinced of the narrative, then it's best to sell. As stated many times, Bitcoins are incredibly risky and volatile. The whole thing is one grand experiment. Don't ever hold more money in Bitcoin than you can afford to lose, and in general you should assume the whole thing will go to zero. Now, if you're curious why this price may be going crazy right now, it's a few factors: 1) A handful of "respectable" online merchants are now accepting Bitcoin, this proves that real businesses see the value in it. It's likely that others will follow. 2) Cyprus scared the hell out of everyone (and rightly so). While a few Cypriots may have bought some Bitcoin, the bigger influence is a world of onlookers who are all thinking, "well that could happen to US!" and "look how Bitcoin solves the problem of trusting banks." It's not so much that Cypriots are buying bitcoins now, but rather that the world realizes that as this euro (and soon dollar...) crisis continues unfolding, a greater number of people will seek some degree of refuge in Bitcoin. Speculators, seeing this possibility, are buying up Bitcoins. 3) Venture capital (and private investor) money is moving into Bitcoin. A handful of VC firms putting in a handful of money would explain the current price rise. 4) An increasingly wide swath of the libertarian/gold & silver "hard money" types are buying into Bitcoin. They were very skeptical at first, but are coming around. There are probably a few hundred thousand people like this in America who are deciding to put a few grand into Bitcoin. 5) The FinCEN ruling clarified the government's stance on Bitcoin about 3 weeks ago. The good news is Bitcoin is very much legal, and will be treated basically like money. People don't need to worry that the government will come down on it any time soon. 6) The press attention gained from all of the above real-world events is fueling a huge amount of hype (justified or not). 7) Ignorant, foolish people are buying bitcoins simply because the price is going up and they think (consciously or unconsciously) that this means it'll go up tomorrow. Maybe 1% of the buying interest is from people like this, or maybe 99%. Such people may get really lucky, or impoverish themselves, but either way they're in it for the wrong reason. All of the above have combined over the past couple months to cause this price rally. It may well be a bubble, and could fall back down to $20/coin. Or, it could be the "new normal" and a new stable price between $100-$300 will be found. Or, it could be the start of a mega bubble that drives prices over $1000 before they come crashing down somewhere and cause widespread misery and chaos. The price right now could be the highest Bitcoin will ever be from now on, or the lowest. Nobody knows! My advice... don't obsess over the fluctuating price on any given day. The market will figure out the value of these coins, and there ain't a damn thing anyone can do to prevent this from playing out. But certainly, Bitcoin is the most important thing happening on the planet right now... and it has nothing to do with the price. -Erik http://www.reddit.com/r/Bitcoin/comments/1bxcm4/an_insiders_opinion_on_the_crazy_bitcoin_market/