Bitcoin's 2016 is off to a solid start.

Bitcoin's price opened yesterday (Jan. 3) at $433.59, which is right around its peak for last week. Bitcoin's price around a month ago was just above $363, but then the digital currency received a relatively solid boost following that. Bitcoin's December peak was on Dec. 15 when it hit $465.50.

While it's early to project what's in store for bitcoin in 2016, some data gathered by CoinDesk — via the Bitcoin Volatility Index — shows that bitcoin's volatility has dropped with each year. In fact, the data shows that bitcoin's rate of volatility has dropped 25 percent a year.

What was noted in the article is that bitcoin's volatility has decreased over the past five years, whereas the value of major traditional currencies, like the U.S. dollar, have declined drastically in the same time period. Some forecast that bitcoin's volatility rates will continue to dip as more and more people become interested in the digital currency.

The big challenge for bitcoin in the next year is for the cryptocurrency community to continue mediating its reputation, as more and more mainstream financial institutions begin to invest in bitcoin's blockchain.

Bitcoin's Outlook Leading Into 2016

Christmas, however, didn't deliver the digital currency community the gift it may have had in mind: Bitcoin's price took a dive of roughly 10 percent, according to price trackers, which showed that it dipped as low as $411.16 on Dec. 26.

For the most part, bitcoin had been rising throughout December, giving hope that January would start out strong. While yesterday's price was only $421 in the early evening, the trends show that bitcoin could be on the mend after its most recent price slump. Some bitcoin industry data, such as tracking provided by Bitcoinity, showed that daily transactions dropped recently as much as 14 percent.

But dipping during the holidays isn't anything new for bitcoin, as it followed the same trends in 2013 and 2014. This has typically been attributed to a dip in transaction volume and less bitcoins being traded. Per usual for bitcoin, in just a few days following Christmas, it was able to spike back to more normal levels for the more recent price trends. Transaction volumes are on the rise, according to reports, and bitcoin exchanges have reported their trading volumes are going back up. Perhaps that aligns with the predictions for 2016.

The year 2015 was a turbulent one for bitcoin, with prices fluctuating between its 2015 low of $177.28 (Jan. 14) to its peak of $465.50 (Dec. 15). But bitcoin's boost toward the tail end of 2015 could mean a better 2016 for the digital currency that's been garnering so much attention lately. With the rumors swirling that bitcoin's creator has been discovered, that's kept prices high, and some in the industry peg that bitcoin will have a strong start in 2016.

But what else is attributing to this projection? A recent Reuters piece dug into the slow growth in the money supply as being one that could give bitcoin's price a boost. Citing the supply-and-demand theory, there's some who've speculated that this could push bitcoin's price up.

For example, Daniel Masters, cofounder of Jersey-based Global Advisors' bitcoin hedge fund, believes that bitcoin could jump back around the 2013 all-time high of $1,100. His projections also have bitcoin surging all the way up to $4,400 eventually, according to Reuters. But that may be far-fetched as many across the financial ecosystem have already called for bitcoin's demise. Still, what he attributes to the rise of bitcoin is the rising acceptance of digital payments and companies that have embraced bitcoin as a legitimate payment method.

There's also been an immense amount of attention given to the blockchain — the technology that powers bitcoin transactions. Masters also suggests that the production rate in the bitcoin mining industry could give bitcoin's price a 50 percent boost. Because bitcoin is still in its early stages, he believes its true potential has not been realized.