Bitcoin, the world’s most popular cryptocurrency, tumbled 17% on Tuesday, sparking a sell-off across digital currency markets as investors grew nervous at sky-high valuations and leveraged players took profit.
Bitcoin suffered its biggest daily drop in a month, falling as low as $45,000. Bitcoin was last down 11.3% at 0939 GMT.
The drop extended a slump of almost a fifth from a record high of $58,354 hit on Sunday – though bitcoin remains up nearly 60% for the year.
“The kinds of rallies we’ve been seeing aren’t sustainable and just invite pullbacks like this,” said Craig Erlam, senior market analyst at OANDA.
Ether, the world’s second largest cryptocurrency by market capitalization that often moves in tandem with bitcoin, also dropped at least 17% and last bought $1,461, down nearly 30% from last week’s record peak.
Digital currency markets have been running hot this year as big companies started to take the emerging asset class seriously, piling money into the sector and driving confidence among small-time speculators.
A $1.5 billion investment in the crytocurrency by electric carmaker Tesla this month has helped vault bitcoin above $50,000 but may now lead to pressure on the company’s stock price as it has become sensitive to movements in bitcoin.
Rising government bond yields over recent days have hit riskier assets, spilling over into leveraged bitcoin markets, said Richard Galvin of crypto fund Digital Asset Capital Management.
“Markets were quite hit from a leverage perspective so that didn’t help,” he noted.
US Treasury Secretary Janet Yellen, who has stressed the need to regulate cryptocurrencies more closely, said on Monday that bitcoin is extremely inefficient at conducting transactions and is a highly speculative asset.
The cryptocurrency’s high volatility is among reasons that it has so far failed to gain widespread traction as a means of payment, according to critics.