Bitcoin is back.

The cryptocurrency surged Tuesday, closing in on the $12,000 level. One bitcoin bull says progress on the regulatory front could send it even higher.

According to CNBC "Fast Money" trader Brian Kelly, Tuesday's rally is the result of more crypto-friendly attitudes by government regulators. Not only did Wyoming on Monday pass a bill relaxing securities law for some tokens, the South Korean government, which had previously vowed to crack down on cryptocurrency trading, said it would "support" and even "encourage" crypto operations so long as they were "normal" transactions.

"The sentiment has changed here, which to me is going to start bringing in more investors to the space," Kelly said Tuesday on CNBC's "Futures Now."

And if this softening of regulations brings investors into bitcoin, which Kelly believes it will, there could be even more buyers kicking in around the $12,000 level.

For those looking to make a trade, Kelly recommended buying March Cboe bitcoin futures at $12,000 with a target of $18,000. Since bitcoin futures are so volatile, he put a stop in at $10,000.

Cboe and CME bitcoin futures hit their highest levels since Jan. 29 in Tuesday's bitcoin rally, up 15 percent and 16 percent, respectively, for their best sessions since they began trading in December.