Bitcoin drops as much as 10% as risky assets tumble globally

"This sell-off is the continuation of a well-established pattern where traders cash in their riskier assets to cover margin calls or sit on the sidelines until markets calm down and they feel more comfortable going back into riskier positions," Valkyrie Investments CEO Leah Wald told CNBC. "If ever bitcoin had the opportunity to establish itself as a safe haven or as digital gold, with U.S. companies also signaling their earnings calls are going to reveal poor results, now feels like the time."

Bitcoin lost as much as 10% on Monday morning. It was last down more than 7% at $43,790.25, according to Coin Metrics. The broader crypto market was in the red too, with ether down 8.5% to $3,060.80, as were crypto-adjacent stocks. Coinbase and Microstrategy lost 3.5% and 4%, respectively, while Square slipped by 2%. In crypto mining stocks, Riot Blockchain fell 6% and Marathon Digital fell 5%.

Many people have argued that bitcoin is most useful as a safe-haven asset, but that narrative could be changing as people realize its price often goes down with broader declines in risk assets. Bitcoin's rally this year has coincided with the risk-on rally and, much like stocks, the cryptocurrency is prone to sharp declines in September.

Jim Paulsen, chief investment strategist at the Leuthold Group, said that although bitcoin tends to dip with the broader markets, that doesn't mean it has any correlation to stocks and went further to say that correlation is "virtually zero."

"That doesn't mean bitcoin can't go down with stocks – and I agree that it often does – but I think it goes down differently than stocks," he told CNBC. "To me it's a very diversifying asset against most of the other things in the portfolio. That in itself can lend itself to lower volatility, but it doesn't necessarily mean that it won't participate in risk-off periods. There's a difference between safe haven and diversifying."

Paulsen added part of the reason bitcoin has been branded a safe haven has to do with its characterization as a currency, which was part of the initial vision for it as written in the original white paper.

"Because it was put into the bucket of currency, it's looked at as a safe haven because the dollar is a safe haven that you run to in times of risk off attitudes among the public," he said. "But this is the farthest thing from a currency you can imagine. It's a method of exchange, but it is not a currency."

While bitcoin was sliding, gold futures climbed 0.8% to $1,765.40 per ounce.

Global equity markets are sliding as investors fear spreading risk from a shakeout in China's property market tied to highly indebted developer Evergrande. Investors are also focused on the Federal Reserve and whether it will signal its readiness to start removing monetary stimulus from the economy. The central bank will begin its two-day meeting Tuesday.

Fundstrat's Tom Lee said the sell-off is showing how much investors have come to value 24-hour liquidity since the start of the "Covid era."

"Both institutions and individuals more willing to go to cash because there's less friction in terms of liquidating. Bitcoin selling off to me is interesting because I suspect it has a lot to do with risk off in Asia," where savers tend to put their money into property and crypto more than equities, Lee explained on CNBC's Tech Check Monday. "I don't think bitcoin's decline today is actually very ominous, but it is showing you that people really value liquidity."

Bitcoin traded above $50,000 earlier this month, topping a key psychological resistance level for trader. Now, however, the cryptocurrency is below its 50-day moving average of $46,514, which analysts and traders look to for a change up or down and to get a sense of the intermediate-term trend.

Investors should "wait until tomorrow's close to decide whether to reduce exposure and manage risk of a more prolonged pullback," Fairlead Strategies managing partner Katie Stockton told CNBC.