The price of bitcoin has plummeted by more than $5,000 in what is the single biggest crash in its history.

After hitting a new all-time high on Sunday above $34,000 (£25,000), bitcoin’s price began to tumble before suddenly dropping below $29,000 on Monday morning. 

Bitcoin had never previously lost more than $4,000 in the space of a few hours, though more severe crashes were seen following the 2017 bull run in terms of percentage losses.

The latest flash crash coincided with world stock markets hitting record highs in the first trading day of 2021.

The cryptocurrency has since recovered slightly and is currently trading at around the $30,000 mark.

The losses once again highlight the volatility of bitcoin, which is increasingly being viewed as a store of value rather than a medium of exchange.

Wild swings in value make it inefficient to use as an everyday currency, however its in-built scarcity makes it an attractive investment option at a time when measures like quantitative easing are devaluing traditional fiat currencies.

With the total supply of the cryptocurrency limited to 21 million bitcoins, some investors have referred to it as digital gold. Bitcoin’s gains in 2020 were 10-times greater than those of actual gold, rising by more than 300 per cent. 

As recently as March, bitcoin was trading below $5,000, having previously peaked at around $20,000 in late 2017.

Market analysts remain optimistic that more gains will likely follow this year due to the global economic strain caused by the coronavirus pandemic, though they also warn that any increases will likely be followed by significant drops.

“With bitcoin having broken $30,000, I think it’s very likely that the asset will eventually pass $100,000 per coin,” Sergey Nazarov, co-founder of blockchain firm Chainlink, told The Independent.

"People have been steadily losing faith in their government currencies for years, and the monetary policies resulting from the economic impact of the coronavirus have only accelerated the decline.

“Many people now understand that central banks around the world are printing money with no end in sight, which is why they’re desperately pouring cash into stocks with prices that are disconnected from reality.”