Goldman Sachs expects bitcoin will hit new records, despite a roughly $600 drop in the digital currency from all-time highs.

"The market has shown evidence of an impulsive rally since breaking above 6,044," Sheba Jafari, vice president on the bank's FICC Market Strats team, said in a Sunday note. "Next in focus [$]7,941. Might consolidate there before continuing higher."

Bitcoin has surged more than sevenfold this year. The digital currency hit a record high of $7,601.53 over the weekend before briefly dropping below $7,000 Monday, according to CoinDesk. Bitcoin was trading around $7,092 Monday afternoon, leaving room for about 12 percent in gains to Jafari's $7,941 level.

Bitcoin over the last six months

Source: Goldman Sachs

To Goldman's Jafari, reaching that price would mark the third of "five-waves up" for bitcoin. In mid-August, she said bitcoin was riding a "fifth wave" of an "impulsive" rally that could run as high as $4,827 before falling as low as $2,221.

Bitcoin hit $5,013 in early September but dropped to $2,951 in about two weeks as China cracked down on digital currencies. A major factor for the latest gains was last week's announcement that the world's largest futures exchange, CME, will launch bitcoin futures by the end of the year. Demand from Japanese investors has also increased — bitcoin trade in Japanese yen now accounts for about 60 percent of trading volume, according to industry data site CryptoCompare.

The five-wave principle of technical analysis on markets is known as the "Elliott Wave."

However, in July The Elliott Wave Theorist newsletter said bitcoin is "making a final fifth wave from six cents."

Correction: This story has been updated to reflect current CoinDesk data that shows bitcoin fell below $7,000 Monday.