After soaring to a new record high and nearly surging past $20,000 on Sunday, bitcoin fell overnight and was trading below $13,000 earlier today.
Bitcoin’s price is famously very volatile so it is difficult for analysts to predict what will happen next and if the latest price crash will continue.
Neil Wilson, senior market analyst at ETX Capital, said: "Has the bubble finally popped? It's hard to see the bell tolling just yet.
"Large price swings have become so normal that it's hard to decide - we can easily see this market bounce back in very short order.
Whilst there have been some hacks, public infighting in the mining community, lots of rumoured forks and regulatory pressure building on some fronts, this is likely to be a simple bout of risk-off selling as investors rebalance towards year-end.
"It looks like it's time to cash in the gains and spend the winnings on a bumper Christmas."
Meanwhile, Charles Hayter, founder and CEO of industry website Cryptocompare in London, suggested that a correction has been a long time coming and many traders could start selling up ahead of the new year.
“A manic upward swing led by the herd will be followed by a downturn as the emotional sentiment changes,” he told Reuters.
"A lot of traders have been waiting for this large correction."
He added: "With the end of the year in sight a lot of investors will be taking profits and saying ‘thank you very much’ and closing their books for the holiday period.”
However, it is not all doom and gloom for bitcoin. The CME and its rival Cboe Global Markets have launched bitcoin futures over the past two weeks.
And despite the plummet overnight, the currency is still well up on the year, rising from under $1,000 in January to around $13,000 today.
Bitcoin is known to go through wild swings. In November, it tumbled almost 30 percent in four days from $7,888 to $5,555. In September, it fell 40 percent from $4,979 to $2,972.
Trading in bitcoin is akin to gambling, so its movements don't follow logical patterns," said Takashi Hiroki, chief strategist at Monex Securities in Tokyo.
"Unlike equities and bonds, it is not possible to calculate expected returns on bitcoin, so buying it becomes a gamble rather than an investment."
Speaking to Express.co.uk, cryptocurrency investor Oliver Isaacs has said that traders can make huge sums of money in bitcoin but it is also a huge gamble.
He said: “Currently if you invest in bitcoin you can make a significant amount of money, but similar to investing in the stock market it is important to be cautious and prevent putting all your eggs in one basket.
“Due to the lack of Bitcoin regulation investing in bitcoin is a risky business and no-one knows if or when bitcoin will crash.”