The price of bitcoin tumbled below $40,000 for the first time in months and other cryptocurrencies were also pressured on Wednesday, after the People's Bank of China apparently warned against using digital coins as payment.

It was the second jolt to the fast-growing crypto market after Tesla last week applied brakes on Bitcoin as a payment mode to buy its electric vehicles, citing environmental harm.

According to Avinash Shekhar, Co-CEO of ZebPay, a 40 per cent dip in the Bitcoin price from its all-time high looks dramatic but is normal in many volatile markets, including crypto, especially after such a large rally.

"Such corrections are mainly due to short-term traders taking profits. Investors should invest in education first. Research the underlying value of Bitcoin, Ethereum, and other crypto assets as you might look at a company's information before buying stocks," Shekhar said in a statement.

On Wednesday, nearly $1 trillion was wiped off the market capitalisation of the entire crypto sector, before it got stablised at around $40,000 per coin.

"Use strategies like rupee cost averaging and SIPs to more confidently manoeuvre through volatility and take a long-term view," Shekhar said.

The crypto crash came as the Indian government plans to come up with a Cryptocurrency Bill.

Experts are of the view that India should formulate regulations in the lines of the developing countries which regulate these currencies including the US, UK, Japan and Australia, among others.

According to Nischal Shetty, Founder and CEO, WazirX, India's crypto policy should be geared towards fostering innovation, and customer safety.

"We should be able to prevent bad activities but keep the door to innovation open by allowing everything else to be built."

Currently, there is no single regulator in a position to regulate the entire crypto sector in the country.

Industry body IAMAI has also appealed to the government not to ban cryptocurrency, while saying that a robust mechanism to regulate the ecosystem is needed.

While the contents of the Bill are not yet known, the Centre in February had said that the Bill would seek to ban all private cryptocurrencies such as Bitcoin and ether.

However, in the recent past, the government had hinted that it would take a 'calibrated approach' towards digital assets.

In March, Finance Minister Nirmala Sitharaman said that all windows on cryptocurrencies will not be closed down, bringing relief to the stakeholders.

Earlier this month, Reserve Bank of India Governor Shaktikanta Das also said that the central bank has flagged major concerns over cryptocurrency to the government.

According to industry experts, crypto may become the most important asset class of the 21st century.