So-called (SegWit) is set to solve the long transaction times on the currency network.
The change saw Bitcoin jump above $3,500, double the lows $1,852 reached last month.
Uncertainty over the future of the digital currency had crashed Bitcoin's price, but fears now appear to have subsided after a split in the currency.
The fork saw the creation of Bitcoin cash, a separate currency, and worth around a tenth of bitcoin.
The implementation of SegWit has now seen Bitcoin jump by a huge 264 per cent this year alone.
Charles Hayter, chief executive of London-based digital currency data firm CryptoCompare, told CNBC: "Segwit activates this afternoon and there is a lot of hope that the network will unclog with lower transaction fees becoming the new normal.
"The SegWit activation opens up projects that bring some capability to the bitcoin network. Instead of bitcoin being held back by infighting, it is now blue skies of opportunity in what can be built."
Some analysts believe the rally could go much further, as cryptocurrencies become more mainstream.
Aurelien Menant, chief executive of the Gatecoin cryptocurrency exchange told CNBC: "Given the technology's move towards scalability, more institutional investors are now considering to allocate funds to bitcoin, which may be exciting the market."
Japan recently helped bring Bitcoin into the mainstream by passing legislation that allows it to be accepted as a legal currency.