Bitcoin was 12 per cent down at 0920 GMT at $47,495. It fell as low as $41,967.5 during the session, taking total losses for the day to 22pc.
The broad selloff in cryptocurrencies also saw Ether, the coin linked to the ethereum blockchain network, plunge more than 10pc.
Based on cryptocurrency data platform Coingecko, the market capitalisation of the 11,392 coins it tracks dropped nearly 15pc to $2.34 trillion. That value had briefly crossed $3tn last month when Bitcoin hit a record $69,000.
The plunge follows a volatile week for financial markets. Global equities and benchmark US bond yields tumbled on Friday after data showed US job growth slowed in November and the Omicron variant of the coronavirus kept investors on edge.
Justin d'Anethan, Hong Kong-based head of exchange sales at cryptocurrency exchange EQONEX, said he had been watching the increase in leverage ratios across the cryptocurrency markets as well as how large holders had been moving their coins from wallets to exchanges. The latter is usually a sign of intent to sell.
"Whales in the crypto space seem to have transferred coins to trading venue, taken advantage of a bullish bias and leverage from retail traders, to then push prices down," he said.
The selloff also comes ahead of testimony by executives from eight major cryptocurrency firms, including Coinbase Global CFO Alesia Haas and FTX Trading CEO Sam Bankman-Fried, before the US House Financial Services Committee on December 8.
The hearing marks the first time major players in the crypto markets will testify before US lawmakers, as policymakers grapple with the implications of cryptocurrencies and how to best regulate them.
Last week, the US Securities and Exchange Commission rejected a second spot-Bitcoin exchange-traded fund proposal from WisdomTree.
Data from another platform Coinglass showed nearly $1bn worth of cryptocurrencies had been liquidated over the past 24 hours, with the bulk being on digital exchange Bitfinex.
"If anything, this is the opportunity to buy the dip for many investors who might have previously felt like they missed the boat. We can see tether bought at a premium, suggesting people are getting cash ready, within the crypto space, to do just that," D'Anethan said, referring to the biggest stablecoin in the cryptocurrency world.
A plunge in Bitcoin funding rates — the cost of holding Bitcoin via perpetual futures which peaked at 0.06pc in October — also showed traders had turned bearish.
The funding rate on cryptocurrency trading platform BitMEX fell to a negative 0.18pc from levels of 0.01pc for most of November.
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