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Bitcoin slid below $7, 000 as the price of several major digital assets also fell sharply.
The world's biggest cryptocurrency by market value fell 8 percent to as low $6,782.64, CoinDesk data showed.
Senior market analyst at eToro, Mati Greenspan, said that the movement in the prices was less linked to recent concerns of a global trade war and more associated with traders evaluating the assets in their portfolio and attempting to assign value to them. He said that there is a big correlation in the way market participants are managing their portfolios and the virtual currencies have been increasingly correlated with the equity markets particularly in the last few weeks.
China revealed new duties on 106 U.S. products on Wednesday, a retaliation that jolted investors and further stoked concerns of a trade war.
Cryptocurrencies such as bitcoin, which are decentralized and not regulated by governments, are considered to be extremely volatile assets. According to analysts, investors were most likely shifting to safer investments as protectionism worries grip markets.
Ethereum and ripple, the second and third-biggest digital currency by market capitalization separately, both observed sharp declines on Wednesday. Ethereum slid over 9 percent to $375.31 while ripple declined over 10 percent to 50 cents.
Bitcoin saw its worst ever beginning to the year this 2018, falling 48 percent over the first quarter. The digital currency reached a record high near $20, 000 last December.
