The rapid runup also coincided with the introduction of a bitcoin futures market in December. Peak prices lined up with the day the Chicago Mercantile Exchange, or CME, introduced bitcoin futures trading on Dec. 17. The Chicago Board Options Exchange, or CBOE, opened a futures market a week earlier. Until futures existed it was extremely difficult, if not impossible, to bet on the decline of bitcoin prices.
On Monday, both of those bitcoin futures hit their lowest level since they were introduced. Bitcoin CME futures fell as low as $5,015, while bitcoin contracts on the CBOE dropped to $4,990.
Other major cryptocurrencies were mostly lower this week and have fared even worse than bitcoin this year. XRP, the second largest by market capitalization, fell 5 percent Monday, while ether dropped more than 13 percent, according to data from CoinMarketCap.com. In the past week roughly $40 billion has been wiped off the entire cryptocurrency market capitalization, which was around $172 billion Monday.
Analysts attributed bitcoin's continued sell-off to technical levels and stop orders in the market kicking in after bitcoin fell below $6,000.
"The next logical level of support is at $5,000 but if that doesn't hold, the next logical support level isn't until $3,500," eToro analyst Mati Greenspan said in a note to clients Monday. "With all the falling prices lately, this definitely fits the definition of a buyers market."
Others pointed to a split in the cryptocurrency bitcoin cash. That digital currency split into two versions last week — "Bitcoin ABC" and "Bitcoin SV" — which analysts said added to uncertainty in broader crypto markets.
U.S. regulators made good on promises to regulate non-compliant cryptocurrency projects last week. The Securities and Exchange Commission announced its first civil penalties against crypto founders Friday as part of a bigger regulatory and legal crackdown aimed at abuses and outright fraud in the growing digital currency industry.
SEC Chairman Jay Clayton said earlier this year that all cryptocurrencies aside from bitcoin and ether constitute securities and "if it's a security, we're regulating it."
"The SEC regulation last week spooked a lot of people," said Kyle Asman, partner and co-founder of crypto advisory firm BX3 Capital. "Those who aren't sophisticated investors hear 'SEC' and they hit the sell button."
The cryptocurrency tumble also comes after fresh warnings from European Central Bank Executive Board member Benoit Coeure at the Bank for International Settlements in Basel, according to a report from Bloomberg News.
"Bitcoin was an extremely clever idea. Sadly, not every clever idea is a good idea," Coeure said Thursday. "In more ways than one, bitcoin is the evil spawn of the financial crisis."
Coeure also said he agrees with BIS head Agustin Carstens, who in June said, "Cryptocurrencies are, in a nutshell, a bubble, a Ponzi scheme and an environmental disaster."
Correction: This story has been changed to clarify that Benoit Coeure was quoting Agustin Carstens when he said on Thursday that bitcoin is "a bubble, a Ponzi scheme and an environmental disaster."