The total market capitalisation of more than 1,300 cryptocurrencies tracked by Coinmarketcap fell from around US$830 billion ($1.15 trillion) to bottom out at US$669b ($932b) on Monday, a drop of 20 per cent. By late Monday, the market was sitting at around US$742b ($1.03 trillion).
Among the hardest hit were ripple, litecoin and bitcoin cash, which at the time of writing were down 25 per cent, 11 per cent and 13 per cent respectively on the previous day, while bitcoin was trading at US$15,215 ($21,205), down more than 7 per cent.
"The most obvious point is how undeveloped the ecosystem supporting bitcoin and cryptocurrency trading still is," said ABC Bullion chief economist Jordan Eliseo.
"It highlights the undeveloped nature of trading in bitcoin, reporting in bitcoin, market data sources for people to utilise when they're wanting to track performance or monitor trends in that space.
"You can look at it two ways and say Coinmarketcap taking Korean prices out of their averages makes the performance of bitcoin and cryptos look worse than they otherwise would, [but] the flip side is that in the past they weren't reporting them accurately."
The move drew fierce criticism from the cryptocurrency community. "Right, might be useful to notify people of things like this before or as you execute to avoid crashing the market, thanks," one commenter wrote on Twitter.
"Really unprofessional," another said. "You ought to have announced this many days in advance and given fair warning to people who depend on your website for accurate movements in markets."
Others weighed in on the broader implications. "How healthy is a market really if a single non-exchange website can crash it?" one commenter on Reddit asked.
It came after a series of reports last week that suggested Chinese officials planned to crack down on bitcoin miners, the networked computers which work to verify transactions on the blockchain and in return receive newly created units of the currency.
Bitcoin mining consumes an enormous amount of energy — 38.6 terawatt-hours a year, or 0.17 per cent of total world consumption, according to Digiconomist. That's more than the individual energy use of a number of countries including Denmark.
The reports in Reuters, Bloomberg and Caixin Global suggested authorities planned to abolish preferential electricity deals and tax deductions for bitcoin mining companies in order to "guide" them towards an "orderly exit" from the country.
Meanwhile, South Korean authorities have reportedly begun inspections at six banks that provide accounts to companies involved in cryptocurrency trading, citing concerns about potential money laundering.
Last month, Australian exchange Coinspot suspended deposits in Australian dollars due to ongoing problems with local banks, which were accused of closing accounts and blocking transactions.
"The regulatory noise in South Korea and China, that's going to be an ongoing threat to bitcoin and to crypto more generally for the foreseeable future," said Eliseo.
"Governments, financial institutions, you name it, are still working out how best to deal with crypto and the businesses involved with it."
Eliseo said it was a "real risk factor" investors needed to be aware of. "While it's very easy to get money into this system to buy cryptocurrency, it may not be so easy to get it out when you want to liquidate your position, realise profit and get your money back into the banking system," he said.
"There is enormous opacity surrounding the vast majority of the leading cryptocurrency exchanges. I think a lot of people, when they buy bitcoin on an exchange, they think they're actually buying a specific bitcoin or portion of a bitcoin, whereas I suspect what they're really buying is a claim on that bitcoin.
"In that sense it's broadly analogous to a bank, which doesn't have a whole heap of banknotes waiting for you to come pick them up, but the big difference is there is absolutely zero governance over these big exchanges. With a bank, the government is there to protect depositors."
It came amid reports that Microsoft was no longer accepting payment in bitcoin, following a similar move by online game distribution platform Steam last year "due to high fees and volatility".
The news was reported by industry blog Bleeping Computer, which cited "several Microsoft employees who have told us the move is temporary and cited the unstable state of the bitcoin currency". Microsoft did not immediately respond to requests for comment.
