During the day, bitcoin fell as low as $41,967 (£32,000), losing 22 per cent of its value, before rebounding to $47,540 (£36,000) as of 2.30pm GMT.
Ether, the second largest cryptocurrency, linked to Ethereum, saw its value tumble by 13 per cent, hitting a low near $3,500 (£2,650) on Saturday.
According to Coingecko, a cryptocurrency data platform, the market capitalisation of the 11,392 coins that it tracks dropped by nearly 20 per cent to $2.2 trillion. Last month, cryptocurrencies on the platform recorded a market capitalization of over $3 trillion when bitcoin hit a record high of $69,000 (£52,000).
Bitcoin has since dropped about 30 per cent but remains up more than 60 per cent this year. This marks a return that far exceeds other assets.
Data from Coinglass, another data platform, showed that over $2.5billion had been liquidated over the past 24 hours, marking the most significant day of cryptocurrency sales since 7 September.
The drop in cryptocurrency market capitalization follows a volatile week for financial markets. On Friday, global equities and benchmark US bond yields fell after data revealed a slump in American job growth in November.
Vijay Ayyar, the head of Asia Pacific at Luno crypto exchange, told Bloomberg that markets had been “jittery” due to uncertainty related to the omicron variant of the coronavirus, which has now been found in 38 countries around the world.
“It’s hard to say what that means for economies and markets and hence the uncertainty,” he said.
Both of these factors have led to more risk averse trading.
The drop in market valuation also comes as executives from eight major cryptocurrency firms are set to testify before the US House Financial Services Committee next week, as lawmakers continue to grapple with how to regulate cryptocurrencies.