Bitcoin fell as far as $33,447, its lowest since January 6.
Ethereum which often moves in tandem with Bitcoin, fell as much as 20 percent
to a one-week low of $1,007.51.
The falls are much larger than the 1 percent drop that sent
gold prices to a one-month low, but reflect a wider dollar bounce against major
fiat currencies as the prospect of higher US interest rates tempers popular
bets against the dollar.
"It's just another way of expressing a dollar
view," said Chris Weston, head of research at brokerage Pepperstone in
Melbourne.
"I know it's a macro play as well, but I do think that
gold and Bitcoin have been used in a fairly similar capacity," he said.
Losses pared a little by lunchtime in Asia to put bitcoin at
$35,192 - about 16 percent below a record peak of $42,000 which the world's
most popular cryptocurrency hit last week.
If sustained, the drop would be the third straight session
of losses since that high, which represented an almost 1,000 percent gain from
a one-year low of $3,850 that Bitcoin hit last March.
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 as a digital currency.
JPMorgan strategists wrote on January 5 that bitcoin has
emerged as a rival to gold and could trade as high as $1,46,000 if it becomes established as a safe-haven
asset.
© Reuters