The cryptocurrency had reached its highest peak earlier on Wednesday, before the FTX collapse.
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The price of bitcoin (BTC) has dropped by about $1,000, or 2.6%, to $20,600 in just two hours after rising to a four-month high of around $21,550.
During the sudden drop, more than $107 million was liquidated across all crypto derivatives markets, according to Coinglass.
The U.S. Department of Justice (DOJ) teased the announcement of a significant global crypto enforcement action coming at noon ET, which contributed to the decline. Jim Bullard, president of the St. Louis Federal Reserve, also made some hawkish remarks, saying that the central bank should raise interest rates by 50 basis points at its next meeting in February, instead of the 25 basis points that the market was expecting.
The Dow Jones Industrial Average, with a 1% loss, is heading the downside for all three major U.S. stock market indices, which are also down.
Ether (ETH) has decreased by 4% to $1,511.
Coinbase (COIN) is down 4%, Marathon Digital (MARA) is down 17%, and MicroStrategy (MSTR) is down 11%, all of which are crypto-related stocks.
The authorities have detained the founder of the unknown crypto platform Bitzlato and accused it of laundering money linked to illegal Russian finance. Bitcoin has slightly recovered and is now trading just under $21,000, indicating that the major may have been overhyped.
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