Bitcoin's value tumbled 15 percent on Thursday to about US$3,300.
"The current pricing assumes massive adoption, and I don't think governments will allow the amount of adoption that's now priced in", said Mohamed El-Erian, chief economic adviser at Allianz Global Investors, on CNBC Wednesday morning.
As one of the biggest bitcoin exchanges in China stopped trading following new Chinese Government rules shutting down all virtual currencies, Bitcoin's worldwide value plunged by almost a third from the record highs it had hit this month. The price of bitcoins soared from around $1,000 at the start of the year to almost $5,000 on September 1.
The move is being as a response to the warning issued on Wednesday by China's National Internet Finance Association (which describes itself as a "national self-regulatory organisation") that cryptocurrencies are increasingly being used tofacilitate illegal fundraising and money laundering.
"China is practically building a cottage industry for mining and exchanging bitcoin and other cryptocurrencies", he noted.
At last, it was made public by several mainland China-based bitcoin exchanges that new policy will see renminbi disallowed on exchanges.
BTC China, one of the nations' biggest online exchanges, said Thursday it will immediately stop accepting new account registrations.
Not everyone is convinced the sky is falling in on bitcoin.
Bitcoin is little more than a "fraud" which will eventually blow up in the faces of traders, according to JPMorgan Chase CEO Jamie Dimon.
While there is lots of speculation, TechCrunch has confirmed with two sources with knowledge of developments that government officials have visited a number of top exchanges to instruct that they cease trading services on Chinese soil soon.
Following China's ban on initial coin offerings of cryptocurrencies, the Asian country looks set to ban all digital currencies by the end of September.
The announcement by the exchange BTTC followed the news a fortnight ago that the Chinese authorities had banned initial coin offerings.