Other smaller coins also skidded sharply as a broader cryptocurrency sell-off, said by traders and market makers to be rooted in heavy selling at leveraged Asian exchanges, gathered steam.
The fall followed a sudden plunge last week that shook bitcoin out of a period of relative stability, where prices had hovered around the $6,500 mark for several months.
Bitcoin sunk as far as $4,327, its lowest since October 2017. By mid-afternoon, it was trading around $4,750 on the Bitstamp exchange.
"We'd been waiting for a break-out," said Mati Greenspan, senior market analyst at eToro. "When you have the price moving so steadily you had lots of stop-loss orders building up - and now you are seeing them being liquidated."
Tuesday's falls coincided with broader drops in financial markets. European shares fell as poor retail results and weakness in Apple Inc
Bitcoin has plummeted over 75 percent this year from a peak of $20,000 touched in December as retail investors piled into a one of the largest bubbles in history.
Traders and market makers blamed bitcoin's slide on heavy selling at leveraged exchanges in Asia such as Hong Kong-based OKEx and Bitmex. Few exchanges in the West lend bitcoin to traders, making the Asian venues popular with speculators.
"The presence of leverage makes day traders attracted to Asian markets," said Michael Moro, CEO of Genesis Global Trading in New York, one of the biggest over-the-counter trading desks.
"Folks who are risking 100X type of leverage, it’s really difficult to think of that as an investment – it’s a casino mentality."
Others blamed fears that last week's "hard fork" in bitcoin cash, where a software upgrade split the fourth-biggest coin into two separate currencies, could destabilize others.
The price of bitcoin tends to be sensitive to debates over how its underlying network evolves. Last year the suspension of hard fork planned by major developers and investors proved a major catalyst to its breakneck rise.
Mainstream investors have stayed clear of bitcoin, with concerns over scant regulatory oversight and undeveloped market infrastructure compounded by frequent swings in price.
That lack of involvement has seen bitcoin struggle to live up to its billing as something that will revolutionize world finance. Its usage as a payment currency has shriveled this year.
At the same time, bitcoin's plunge in value has calmed the fears of regulators and central bankers that it could one day pose a risk to financial stability.
According to industry tracker Coinmarketcap.com, the total value of cryptocurrencies is now around $154 billion, down from a peak of around $800 billion in January.
Cryptocurrency advocates say bitcoin is still young and price volatility is to be expected. Many predict the need for virtual currencies that operate beyond mainstream banking will outlast any short-term price falls.
By late afternoon, XRP and ether were trading around $0.45 and $142 respectively on the Luxembourg-based Bitstamp exchange.
"The euphoria has died and prices have consolidated with lower lows and lower highs," said Fawad Razaqzada, an analyst at Forex.com. "A lot of people have lost interest." - Reuters
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