Bitcoin may be feeling the effect of other global markets sliding this week.
"Markets around the world are fragile, and panic and sentiment are playing a disproportionate role right now," Tom Lee, co-founder of Fundstrat Global Advisors, told CNBC Tuesday. "Does this mean bitcoin is broken? No. The use case is still there, but in the short term, panics are panics,"
A drop below $6,000 earlier and other key technical levels this week triggered "stop losses" for some traders and likely exacerbated the selling. Those technicals "deteriorated" as bitcoin support levels were broken and the cryptocurrency continued to hit lower lows, Lee said.
He also pointed to Securities and Exchange Commission enforcement against multiple cryptocurrency projects last week for the precipitous drop. The SEC announced its first civil penalties against cryptocurrency founders on Friday as part of a wide regulatory and legal crackdown on abuses and outright fraud in the industry.
Reports of possible cryptocurrency market manipulation also piled onto the negative sentiment. The U.S. Justice Department is looking into whether traders used another cryptocurrency called tether to bid up bitcoin prices during its rally last year, Bloomberg News reported Tuesday, citing three people familiar with the matter.
Lee, former chief equity strategist at J.P. Morgan, and others others pointed to a "fork" in the cryptocurrency bitcoin cash. That digital currency split into two versions last week — "Bitcoin ABC" and "Bitcoin SV" — and diverted what's known as "hash power," which analysts say affected the broader crypto markets.
"The 'Hash War' between Bitcoin Cash ABC [and] SV continues to impact the market," said Brian Kelly, CEO and founder of BKCM. "Both sides appear to be selling bitcoin to fund mining operations to win the battle."
The drop also comes on the heels of a warning from European Central Bank Executive Board member Benoit Coeure at the Bank for International Settlements in Basel. According to Bloomberg News, Coueure called it "the evil spawn of the financial crisis," and said he agrees with BIS head Agustin Carstens, who in June called cryptocurrencies "in a nutshell, a bubble, a Ponzi scheme and an environmental disaster."
Clarification: This story was revised to clarify the summary lines that bitcoin has fallen to its lowest level since September 2017.