The US Securities and Exchange Commission has rejected a bitcoin exchange-traded fund's bid to list.
The SEC said the fund, founded by the Winklevoss twins, was a fraud risk and that there was a lack of regulation in the world's bitcoin markets.
The cryptocurrency surpassed $1,300 in trading yesterday as the market waited for the ruling, but then crashed back down to less than $1,100. At time of writing, the currency was at $1,187.
The fund from the Winklevoss twins, who are known for their role in the founding of Facebook, was one of three bitcoin-tied ETF's that were up for approval with SEC.
Approval of the fund would have been a major step towards making bitcoin mainstream, but the SEC has said "those markets must be regulated" and that the exchange must have surveillance agreements with significant markets.
Mati Greenspan, senior market analyst on eToro, said: “Many traders are disappointed by the SEC’s decision, but perhaps not surprised. In recent days, we’ve seen sentiment drop among traders on the eToro platform and post-announcement this has fallen sharply.
"However, this is by no means the end – several more decisions are planned over the coming months and bitcoin traders will be hoping for a more positive outcome next time.”