For more than a decade, bitcoin has been a huge success story. Scorned by skeptics since its inception, the value of the cryptocurrency has gone from less than $0.01 to nearly $15,000. Along the way, bitcoin has suffered huge plunges, but so far, it's always found a way to pull back higher.

Now things are lining up for bitcoin. If there were ever a time for the premier cryptocurrency to challenge and surpass its record highs from three years ago, it's right now. Regardless of whether you believe in the potential of crypto or think it's a passing fad, this is bitcoin's defining moment -- the moment when it will show whether it can achieve mainstream popularity or remain a niche asset class.

The bull argument for bitcoin

Bitcoin's fundamental premise has been that decentralized digital currency offers advantages over government-issued fiat currencies for those seeking to preserve value. Bitcoin owners don't have to worry about the actions of central banks or regulators and their potential impact on its value in comparison to other forms of money.

3-D mosaic of yellow tiles in the bitcoin logo, with gray tiles surrounding it.

Image source: Getty Images.

As a result, bitcoin has tended to perform the best when there's doubt about the ability of the traditional monetary system to handle challenging conditions. By contrast, when the financial system seems strong, the demand for bitcoin has often eased lower.

There's arguably never been a time when there were more factors favoring bitcoin:

  • As of late Thursday, Nov. 5, the results of the 2020 U.S. presidential election were still unknown. Vote counting continued to proceed, and legal challenges to the results could create uncertainty for weeks to come.
  • The COVID-19 pandemic is putting unprecedented pressure on the global economy. Tens of millions of Americans are out of work, and discussions for further government stimulus measures have run into a political wall.
  • Central banks around the world are resorting to extraordinary measures to shore up the financial system and ensure some measure of stability. However, many believe that there are few additional options for central banks to take further action if current measures fall short.
  • Back in May, the reward that bitcoin miners received for their work got cut in half. Past "halving" events have often led to a subsequent rise in bitcoin prices.
  • It's becoming increasingly easy to buy bitcoin and use it in transactions. Electronic-payment giant PayPal Holdings (NASDAQ:PYPL) became the latest company to offer trading in bitcoin, as well as Ethereum, Bitcoin Cash, and Litecoin. As mainstream companies increase adoption, bitcoin will become a more common way of conducting transactions.

It's therefore not surprising to see bitcoin pushing higher. In just the last month, bitcoin prices have risen from just over $10,000 to just below $15,000. That has many calling for the cryptocurrency to rise further and challenge its all-time high just under $20,000, set back in December 2017.

Expect huge volatility

One valid criticism of bitcoin is that the market for the cryptocurrency has been incredibly volatile. Long-term investors have gotten rewarded handsomely but have had to endure multiple gut-wrenching drops of 90% along the way. The most recent major decline for bitcoin slashed more than half its value during the COVID-19 bear market.

Indeed, skeptical observers cite bitcoin's failure to perform during the early days of the global pandemic as evidence that the cryptocurrency doesn't serve the purpose its advocates intend it to serve. Rather than providing a safe haven in tough times, bitcoin merely acted like a host of other investment assets.

Now's the time to watch bitcoin

Nevertheless, bitcoin has its chance right now to break into the mainstream. As more people get access to participate in another big move higher for cryptocurrencies, investors will get to see firsthand whether bitcoin reaches its full potential as a viable alternative to fiat currency.

Rising adoption could finally push bitcoin over the threshold into mainstream acceptance. But if bitcoin falls flat this time around, the investors that the cryptocurrency needs to embrace it might finally lose faith once and for all.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.