Bitcoin, the best known of hundreds of 'virtual' coins, slumped Tuesday to a six-week low below $12,000 (15,000 AUD) as analysts blamed a rush by various jurisdictions to regulate the sector.
The drop came after reports that a ban on trading of cryptocurrencies in South Korea is still an option, driving fears of a wider regulatory crackdown.
The final weeks of last year were marked by bitcoin mania as the unit topped $20,000, but it lost some 20 percent on Tuesday's trading, which saw most of its fellow cryptocurrencies similarly wilt.
"Bitcoin has dropped below $12,000, a level not seen since early December. The cryptocurrency has fallen nearly 40 percent since its all-time high," noted David Madden, market analyst with CMC Markets.
Bitcoin's slide triggered a massive selloff across the broader cryptocurrency market, with biggest rival Ethereum down 23 per cent on the day, according to trade website Coinmarketcap, and the next-biggest, Ripple, plunging 33 per cent.
"Explaining moves in bitcoin is always tricky but this plunge ... may well be a result of recent signs that regulatory pressures are building," said Neil Wilson, analyst for ETX Capital, as several countries, notably China and South Korea, target a crackdown.
Last week saw prices sag after the South Korean government said it was planning to ban cryptocurrency exchanges.
South Korean news website Yonhap reported Finance Minister Kim Dong-yeon had told a local radio station that the government would be coming up with a set of measures to clamp down on the "irrational" cryptocurrency investment craze.
Cryptocurrency Bitcoin has seen a large fall. Source: AAP Image/EPA/SASCHA STEINBACH
Though it later backtracked -- while Justice Minister Park Sang-Ki said Seoul was preparing a bill to shut down the country's virtual coin exchanges to slam the brakes on a craze which "has started to resemble gambling and speculation."
South Korea is a hotbed for cryptocurrency trading, accounting for some 20 percent of global Bitcoin transactions, while much of the "mining" -- computerised creation -- of the coin units is undertaken in China.
"South Korea holds some of the world’s largest cryptocurrency exchanges, so a ban is expected to disrupt Bitcoin trading," said a note from British consultancy Capital Economics, which also alluded to Chinese concerns of Bitcoins' effect on financial stability.
Bitcoin slid on the latest news, trading as low as $US11,191.59 on the Luxembourg-based Bitstamp exchange, down 18 per cent on the day, for a short period putting the digital currency on track for its biggest one-day fall in three years.
Lukman Otunuga, research analyst at FXTM forex forecaster, also blamed the market jitters on the political regulatory backdrop surrounding the sector, which topped $600 billion in market capitalisation in mid-December.
"Bitcoin was the talk across financial markets for all the wrong reasons on Tuesday after prices tumbled sharply to their weakest level since early December," said Otunuga, noting talk of tighter regulation "has effectively eroded investor appetite for bitcoin.
"With reports on a renewed crackdown on the cryptocurrency in China fueling anxiety over future restrictions, further losses could be on the cards in the near term," added Otunuga, noting the latest wild ride in value "should remind investors on how explosively volatile and unpredictable" cryptocurrencies can be.
"One has to ask if Bitcoin is currently in the process of flickering violently before it burns out?"
Cryptocurrencies enjoyed a bumper year in 2017 as mainstream investors entered the market and as an explosion in so-called initial coin offerings (ICOs) - digital token-based fundraising rounds - drove demand for bitcoin and Ethereum, the second-biggest digital unit.
The latest tumble leaves bitcoin down more than 40 per cent from the record high around $US20,000 it hit in mid-December, wiping about $US130 billion off its "market cap" - the unit price multiplied by the total number of bitcoins that have been released into the market.
- With AAP
