Dan Morehead, the CEO of Pantera Capital said bitcoin price would rise but that cryptocurrency mining does not have any fixed support like other markets such as copper so cryptocurrency companies risk running losses for months.

Mr Morehead told CNBC: “I think it is very difficult to ever do real world calculations of the cost of mining.

“All these are sunk costs and people have built these enormous data centres with computer chips that are doing the mining.

“The company might run a loss for six months hoping that the price is coming back.

“I think there really isn’t a level like in copper, where if you get below the marginal cost people just stop their mines.

“Here I think there isn’t some kind of fixed floor like that.”

He added: “Bitcoin was half this price a year ago and it was all working great.

“The price could go down but I really do think a year from now it will be much higher than it is today.”

Continued uncertainty over the Securities and Exchange Commission’s (SEC) decision whether to approve a proposed bitcoin exchange-traded fund (ETF) has caused prices to crash.

Bitcoin lost a huge amount of ground on Wednesday, dropping 8.72 percent on the day to trade at $6,494.73.

Ethereum crashed down by 11.98 percent to trade at $306.88.

Bitcoin and other cryptocurrencies have faced criticism by banks and finance experts, with billionaire Bill Gates telling CNBC he would bet against the bitcoin and short it if he could.

The Microsoft co-founder said: “As an asset class, you’re not producing anything and so you shouldn’t expect it to go up. It’s kind of a pure ‘greater fool theory’ type of investment.”

He added: “I agree I would short it if there was an easy way to do it.”

Former PayPal CEO Bill Harris also claimed bitcoin is the “greatest scam in history”.