Bitcoin surged more than 17 percent in a sudden move on Thursday to above $8,000 at one point, according to trading on Coinbase.
The cryptocurrency hit a high of $8,011 on Coinbase.
Trading was volatile and it was 11.5 percent higher near $7,645 as of 8:19 a.m. ET, according to Coinbase. Bitcoin leaped from a low of $6,786 Thursday morning and some traders are watching whether it can hold above $7,500.
"Once [bitcoin] broke higher, shorts were squeezed and forced to cover," said Brian Kelly, CNBC contributor and head of BKCM, which runs a digital assets strategy for clients.
A sudden jump in bitcoin prices forces traders who had bet against the cryptocurrency to buy back into the market.
"The ratio of short margin trades versus longs has been increasing recently," said Nick Kirk, quantitative developer and data scientist at Cypher Capital, a cryptocurrency trading firm. "Buying volume ticked up today and a lot of these short trades got liquidated, helping fuel the rally."
Bitcoin had been suffering from tax-related selling in the run-up to the U.S. tax deadline on April 17. Some traders indicated Thursday's move could be an unwinding of that pressure.
Bitcoin has treaded water in April after dropping below $7,000 at the end of last month. It surged above $19,000 in December.