Bitcoin's gains followed an uneventful split last week into bitcoin and bitcoin cash, an upgrade proposal supported by a minority of developers. This week, an overwhelming majority of developers signaled their support for a more popular upgrade called Segregated Witness, or SegWit.

"With SegWit locked in, and an effective split between two camps with differing visions for the asset (BTC and BCH), it is now experiencing a relief rally," said Chris Burniske, author of the upcoming book, "Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond."

"A greater number of entities, including institutions, are waking up to bitcoin's merits as a currency that is uncorrelated to the traditional capital markets," he said.

Many digital currency enthusiasts believe bitcoin will one day become "digital gold" amid the rise of other cryptocurrencies. The supply of bitcoin is limited to 21 million, but demand for the digital currency remains high as it's typically the way for new investors to participate in the growing, larger world of cryptocurrencies.

Bitcoin already trades at nearly three times the price of gold.

Some Wall Street analysts have also published research in the last several weeks noting how bitcoin could rise several thousand dollars if even a small percentage of holdings in gold, stocks and bonds flowed into the digital currency.

U.S. stocks remain close to their all-time highs, and many strategists expect a deeper pullback soon due to seasonal factors and overextended prices. The S&P 500 closed below its 50-day moving average Thursday for the first time since July 6, led by declines in technology stocks.

Stocks were slightly higher Friday, but the Technology Select Sector SPDR ETF (XLK) remained 0.8 percent lower for the week, tracking for its worst week since the end of June. The S&P 500 was on pace for a decline of about 1.3 percent for the week, its worst in at least four months.

That said, there's no guarantee the digital currency can keep climbing even if it's survived this summer's controversy over the best way to upgrade the bitcoin network. The second phase of Segregated Witness is set to take place in November and could result in yet another split in the digital currency.

"Every day sees new buyers entering the market, and as the price rises, owners of Bitcoin only become more bullish," Ari Paul, CIO of cryptocurrency investment firm BlockTower Capital, told CNBC in an email. "This trend may continue until there's an exogenous shock to entice new sellers."

Another digital currency, ethereum, was little changed around $300 Friday, according to CoinDesk.

The bitcoin offshoot, bitcoin cash, traded 13 percent higher near $330, according to CoinMarketCap.

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Bitcoin surges to fresh record above $3500, beats gold amid the global market sell-off - CNBC