Bitcoin has lost nearly 30% of its value during the past week alone, almost wiping out gains in the asset’s value over the year to date.

About $400bn has been wiped from the total digital currency market since Friday, when a major Bitcoin mining hub ordered miners to shut down operations. It followed reports that China’s central bank had a meeting with banks and gave instructions to freeze all payment channels supporting cryptocurrency trading.

Bitcoin briefly dropped below $30,000 – seen as a key support level – on Tuesday before rallying slightly.

Simon Peters, cryptoasset analyst at eToro, said: “Bitcoin has gone below $30,000 (£21,470) for the first time since January. The primary reason for the sell-off has been the crackdown in China on mining operations and banking services.

“Whilst short term uncertainty off the back of the latest news is driving the sell-off, in the long-term this market transition could be very beneficial to bitcoin and crypto more broadly. Decentralising crypto mining and ending Chinese dominance when it comes to mining could help other more crypto-friendly countries become leaders in the space.

“New mining operations – or existing operations moving out of China – could now look towards renewable energy sources to enable clean operations. Over time, this could decrease the amount of fossil fuel energy used for global bitcoin mining.

“As we have seen recently, crypto is a highly volatile asset class and we urge investors to remember the basic tenets of investing; diversify, understand what you are investing in and never invest more than you can afford to lose.”

Bitcoin volatility last month was largely attributable to electric car manufacturer Tesla ditching the cryptocurrency due to environmental concerns. Tesla founder Elon Musk announced the move to temporarily abandon Bitcoin in a Tweet, resulting in the value of Bitcoin falling, although later recovering.