The pullback comes amid growing concerns that bitcoin is one of a number of financial market price bubbles.
Fears that US President Joe Biden's administration could attempt to regulate cryptocurrencies have also weighed on sentiment, traders said.
During a Senate hearing on Tuesday Janet Yellen, Biden's pick to head the US Treasury, expressed concerns that cryptocurrencies could be used to finance illegal activities.
"I think many are used, at least in a transactions sense, mainly for illicit financing, and I think we really need to examine ways in which we can curtail their use and make sure that money laundering does not occur through these channels," said the former chair of the US Federal Reserve.
Joseph Edwards of cryptocurrency broker Enigma Securities said these comments had a substantial impact.
"The action over the last 36 hours or so has largely been rippling outwards from the Janet Yellen comments on crypto," he said, adding that it was still unclear exactly what, if any, moves the Biden administration would take.