Kevin Warsh, a one-time Bitcoin skeptic, appears to have softened his stance on the asset following the past few weeks of strong performances.

Speaking with CNBC's Squawk Box, Warsh, a former Governor of the Federal Reserve, explained that the leading cryptocurrency had benefited largely from the slip in the dollar across last year.

Bitcoin's rally has extended to six weeks now, with the leading cryptocurrency jumping by almost 100 percent in that time.

While many industry insiders have touted institutional investment growth as the primary reason for Bitcoin's march, many in the traditional finance space believe that inadequate monetary policies are to blame. Warsh appears to share that sentiment, telling CNBC's Andrew Ross Sorkin that Bitcoin holds significant value for investors in this environment.

Warsh pointed out that the Federal Reserve, headed by Governor Jerome Powell, had undergone a significant shift in response to the coronavirus. Accelerated stimulus spending and the Fed's decision to suspend interest rate increases until inflation rose above two percent have eroded faith in the agency's ability to implement effective monetary policy. So, naturally, investors have run for the hills.

The former policymaker added that with the dollar weakening, it is no surprise that Bitcoin is on the rise. Bitcoin has risen by 28 percent this year alone, at press time.

Warsh also pointed out the contrast in Bitcoin's performance with that of gold – its chief rival. As he told Sorkin, alternative assets have enjoyed the most from the weakening dollar, but the existence of Bitcoin has essentially eroded part of gold's gains.

Explaining the reason for this, Warsh revealed that Bitcoin looks more attractive to millennials and Gen Z members. With each passing day, Bitcoin is getting new credibility as an alternative currency.

The links between Bitcoin and gold have been extensive for years. However, with the leading cryptocurrency's recent performance, many have pointed out the differences in their price and the possibility of Bitcoin usurping gold entirely.

While gold still has about five times the value of Bitcoin in market cap, there is no denying that the latter is gaining on its chief rival. For some analysts, the rise of Bitcoin over gold is an inevitable occurrence.

This week, analysts at JPMorgan charted a possible scenario where Bitcoin could knock gold off its perch.

In a recent report, the analysts explained that Bitcoin has a realistic chance of becoming bigger than gold. However, such an eventuality will depend on Bitcoin's volatility converging with gold's. Considering that this is unlikely to happen quickly, the JPMorgan analysts believe that a Bitcoin price of around $146,000 could be considered a suitable long-term target.

It also helps that several top names in the finance world are beginning to rally behind Bitcoin – or, at least soften their negative stance concerning it. From Ray Dalio to Stanley Druckenheimer, top investment heavyweights are starting to give Bitcoin a chance. With institutional investment in the asset already on the rise, it's only a matter of time before more of the big bucks start rolling in.

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