Bitcoin keeps falling, and worries keep rising

Will bitcoin get any bites in 2015?
Will bitcoin get any bites in 2015?   

Following a 15 percent drop on Tuesday, the price of bitcoin took another hammering on Wednesday, making some traders worry about the stability of the cryptocurrency.

Bitcoin—which saw levels above $400 in November and topped out at $1,150 in 2013—briefly fell as low as $170 in Wednesday morning trading before edging back a few dollars. Bitcoin is notoriously volatile, but its swings are often linked to news about the technological ecosystem that supports it. This time, however, the source of the day's 22 percent drop is less obvious.

Read MoreMajor bitcoin exchange suspended after price plunge

Brendan O'Connor, managing director for trading at SecondMarket, told CNBC after Tuesday's plunge that there was "no huge negative catalyst" for the move. He theorized, however, that some of the selling could be "delayed aftermath" of last week's exchange drama: Bitstamp, the second-largest bitcoin-dollar exchange, temporarily suspended its services after it said it was hacked.

Bitcoin
Scott Mlyn | CNBC

The exchange ultimately resumed services after admitting that about $5 million worth of bitcoins had been stolen. O'Connor said the development may have spooked some cryptocurrency speculators, as Bitstamp had a reputation as one of the more professional outfits in the bitcoin community.

"I would imagine they were inundated with requests for withdrawal on Friday," he said.

Read MoreBitcoin breaks another key level

Another factor weighing on the cryptocurrency is that Russia is beginning to ban bitcoin-related websites, "Fast Money" trader Brian Kelly pointed out in a blog post.

Still, the selling that continued into Wednesday may also be part of a vicious cycle, as some have theorized on the influential Reddit bitcoin forum. In other words, the low prices may be forcing volunteers who "mine" new bitcoins to cut their losses. If the price falls below the electricity and hardware costs of "mining" bitcoins—a process that involves solving highly complex mathematical algorithms—then the enterprise becomes unprofitable, and some miners will be forced to sell their holdings and give up.

That said, bitcoin's death has been predicted many times (one site has counted 29 obituaries), and some predict that the technology behind the system could live well beyond the currency it now supports.