Other digital currencies such as Ether and Dogecoin shed 22% and 24% respectively
The price of Bitcoin dropped below $34,000 (£24,030) for the first time in three months on Wednesday, after China imposed fresh curbs on crypto-currencies.
Beijing banned banks and payment firms from providing services related to crypto-currency transactions. It also warned investors against speculative crypto trading on Tuesday.
It follows falls in Bitcoin of more than 10% last week after Tesla said it would no longer accept the currency.
On Wednesday afternoon, Bitcoin recovered some ground, although it was still down -10.4% at $38,131.
Meanwhile, other digital currencies such as Ether, which acts as the fuel for the Ethereum blockchain network, and Dogecoin shed as much as 22% and 24% respectively.
At the same time, Tesla shares dropped more than 3% on Wall Street, possibly because of the electric carmaker’s exposure to Bitcoin.
The firm, owned by Elon Musk, still holds nearly $1.5bn worth of the crypto-currency.
Crypto-currency trading has been illegal in China since 2019 in order to curb money-laundering. But people are still able to trade in currencies such as Bitcoin online, which has concerned Beijing.
On Tuesday, three state-backed organisations, including the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China issued a warning on social media.
They said consumers would have no protection if they were to incur any losses from crypto-currency investment transactions.
They added that recent wild swings in crypto-currency prices seriously violate people’s asset safety and are disrupting the normal economic and financial order.
Neil Wilson of Markets.com said: China has for some time been putting pressure on the crypto space, but this marks an intensification – other countries might follow now as central banks make strides towards their own digital currencies.
He said: Until now, Western regulators have been pretty relaxed about Bitcoin, but this might change soon.