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Cryptocurrencies have quickly emerged as one of the hottest investment vehicles of the past decade, gaining traction first from retail traders, as seen in 2017, and now from institutional investors.

From being a domain of bedroom coders to a growing financial sector with over $2 trillion in market capitalization, the crypto space has seen a sudden surge in value and continues to attract huge interest from investors.

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By Tom Westbrook and Gertrude Chavez-Dreyfuss

NEW YORK/SYDNEY (Reuters) - Bitcoin and ether hit record peaks on Tuesday, with enthusiasm for cryptocurrency adoption and worry about inflation driving momentum and flows into the asset class.

Though both virtual currencies pulled back from their highs in the U.S. session, their trajectory was clearly headed higher.

Bitcoin rose as high as $68,564.40 and was last down 0.1% at $67,325 while ether, the second-biggest cryptocurrency by market value, earlier hit $4,842.65 before trading down 0.7% at $4,774.

Both have more than doubled since June and added nearly 70% against the dollar since the start of October.

"This move is a culmination of months of net outflows from exchanges and coming off the market, coupled with increasing demand," said Martha Reyes, head of research at digital asset prime brokerage and exchange BEQUANT.

"This creates a supply shock and we are far from levels where long-term holders, who make up a greater number of investors, start taking significant profits so $100,000 is on the horizon," she added.

Market momentum has been gathering since last month's launch of a futures-based bitcoin exchange-traded fund in the United States raised expectations of flow-driven gains.