Bitcoin tumbled this morning as investors ditched cryptocurrencies amid nervousness over sky-high valuations.
Bitcoin suffered its biggest daily drop in a month to fall as low as $45,000 before recovering to just over $48,500. Ethereum is also down more than 18 per cent to $1,512.
It follows Monday’s crash which saw Bitcoin plunge from $58,000 to $47,400. At one point the cryptocurrency fell $5,000 in 10 minutes before paring back its losses somewhat.
It comes just days after the world’s biggest cryptocurrency hit a new record of $58,354 on Sunday.
Analysts pointed to Elon Musk, who commented the price was too high, for the sharp fall in bitcoin over the past day.
Musk’s electric vehicle firm Tesla recently invested $1.5bn in bitcoin but as a result of his tweets is set to open lower later today.
“There is little doubt that it’s less than ideal for a ‘safe haven’ asset to follow one man’s words to the letter. Bitcoin remains highly volatile, and unpredictable – unless you can predict Elon Musk thoughts in advance,” Ipek Ozkardeskaya, senior analyst at Swissquote said.
“Speculators are clearly hanging on [Musk’s] every word… This kind of euphoria should probably make people nervous but I doubt it will. I’m sure new highs are just around the corner,” Craig Erlam, senior market analyst at Oanda.
Despite the widespread support, Treasury secretary Janet Yellen warned that “Bitcoin is an extremely inefficient way of conducting transactions and the amount of energy that’s consumed in processing those transactions is staggering”.