Bitcoin slid as much as 18% today to a four-week low, as fears of a regulatory crackdown on the market spread after reports suggested it was still possible that South Korea could ban trading in cryptocurrencies.
Bitcoin's slide triggered a selloff across the broader cryptocurrency market.
Its biggest rival Ethereum was down 23% on the day at one point, according to trade website Coinmarketcap.
The next-biggest, Ripple, plunged by as much as a third.
Bitcoin traded as low as $11,191.59 on the Luxembourg-based Bitstamp exchange in earlier trade.
It later edged up to $11,650, but that was still down more than 14%, leaving it on track for its biggest one-day fall since September.
Jamie Burke, chief executive of Outlier Ventures, a venture capital firm that is one of the biggest holders of top-10 cryptocurrency IOTA, said the belief the market was overdue a correction was making traders jittery and that was exacerbating the scale of the moves.
"Anybody that understands the technology knows there's going to be a correction - it's going to be a big correction and it's going to be indiscriminate, because there are no established fundamentals for anybody to distinguish between where there is and isn't value," Burke said.
"There's no way you can rationalise that there's any value in the market at the moment; everything is significantly overpriced," he added.
South Korean news website Yonhap reported that 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.
South Korea said yesterday that its plans to ban virtual coin exchanges had not yet been finalised, as government agencies were still in talks to decide how to regulate the market.
That came amid news that a senior Chinese central banker had said authorities should ban centralised trading of virtual currencies and prohibit individuals and businesses from providing related services.
China shut down exchanges operating on the mainland last year - a move that also sparked a selloff, though the market later recovered.
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 latest tumble leaves bitcoin down around 40% from a record high near $20,000 hit in mid-December, wiping about $130 billion off its total market value - the unit price multiplied by the number of bitcoins that have been released into the market.
A director at Germany's central bank said yesterday that any attempt to regulate cryptocurrencies must be on a global scale as national or regional rules would be hard to enforce on a virtual, borderless community.
The latest plunge in the market came as wealth management firm deVere Group, which has $12 billion under advisement, said it was launching a cryptocurrency app that would allow users to store, transfer and exchange five of the biggest digital coins, citing "soaring global demand".