Galaxy Investment Partners CEO Michael Novogratz said bitcoin will be difficult for governments to crack down on.
"I've got concern that if price movements go higher we're going to get more regulation," Novogratz said. But "I think it's hard to shut down. ... I don't think that's a probability."
"One of the big risks out there right now is that prices are moving so fast that regulators are going to get nervous," he added. "I could legitimately see bitcoin go $13,000, $14,000, $20,000, $25,000 and see somebody balk." He pointed out that right now most regulators, including those in the U.S., are working with the digital currency system and are "intrigued" by it.
Novogratz was speaking on CNBC's " Power Lunch ." He was formerly a macro hedge fund manager at Fortress Investment. He is launching a $500 million fund to invest in cryptocurrencies.
"We're in a speculative frenzy. Period. Stop. How long can it go? who knows," Novogratz said. "What's interesting about this is it's global."
At least 171 "cryptofunds" have launched, including 123 this year alone, according to financial research firm Autonomous Next.
Bitcoin has soared more than 1,100 percent this year and hit a record high of $11,860 on Tuesday, according to CoinDesk. The digital currency has moved dramatically from being a fringe asset to a globally traded product. Cboe Global Markets is set to launch bitcoin futures on Sunday, followed by CME's bitcoin futures on Dec. 18, bringing bitcoin one step closer to becoming a legitimate asset class.
Novogratz expects one day there will be cryptocurrencies for cloud-sharing, ride-sharing and other uses.
"Bitcoin is winning out as digital gold," he said. "I don't think it's going to be a currency. … Nothing that volatile is going to be a currency."