Bitcoin slumped $30,699, its lowest since January 5, after extending earlier losses in Asian trading hours and was last down 15 per cent at $32,675.
If sustained, the one-day drop would be the biggest since Covid-19 caused chaos in financial markets in March.
The falls reflect a wider dollar bounce against major fiat currencies as the prospect of higher US interest rates tempers popular bets against the dollar.
Second-biggest cryptocurrency ethereum which often moves in tandem with bitcoin, fell as much as 23 per cent to a one-week low of $985.
Interest in bitcoin has been soaring as institutional investors began buying heavily, viewing it as both an inflation hedge and as exposed to gains if it became more widely adopted.
The cryptocurrency more than doubled in price from early December to a record $42,000 on Friday, leading some investment banks to warn of an impending bubble.
BofA said last week the world’s popular cryptocurrency “blows the doors off prior bubbles”, such as the dotcom boom, China in the 2000s and gold in the 1970s.
JP Morgan strategists, however, said that bitcoin has emerged as a rival to gold and could trade as high as $146,000 if it becomes established as a safe-haven asset.