The value of the cryptocurrency has rocketed in recent weeks and has risen from around $1,000 (£750) at the start of 2017. Many commentators have warned that the surge is a bubble that could soon burst.
Friday’s fall prompted three exchanges to halt trading. One, Coinbase, said buying and selling was disabled as a result of technical problems caused by high traffic. It later reopened trading as prices recovered to above $13,000 (£9,700).
The drop, which also affected other cryptocurrencies, is believed to be a result of panic selling amid speculation that the bitcoin bubble could be about to burst.
Tech entrepreneur and investor Oliver Isaacs said the fall was the result of a “herd mentality”.
He said: “Just as people feared missing out on the way up, the idea you can actually lose money is also a new emotion investors are experiencing and people, especially retail investors, are selling manically on the way down.”
Because bitcoin trading is unregulated, there are no rules to stop a mass sell-off. Only individual exchange websites can stop their users trading.
Some analysts said they consider the fall to be temporary and expect the cryptocurrency to rally in the short-term, although many predicted further falls in the New Year.
Michael Jackson, partner at venture capital firm Mangrove Capital Partners, said the dip was not too bad and believes the price will rally.
“The vast majority of long-term holders of bitcoin are still way in the money and have shown no sign of cashing out,” he said. “We see the exit of short-term speculators and we have seen it before.
“The fundamentals are still in place and there is no reason why the bitcoin ecosystem should not continue to develop.”
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