Bitcoin had been steadily rallying through 2016 and appreciated to more than $1,100 on January 5th, near to its record high, but the digital currency subsequently crashed, dropping back to the $900 level.
Last week, the People's Bank of China met with three of the country's largest bitcoin exchanges to talk about market regulations.
Follow CNBC International on Twitter and Facebook.
Hayter added that the move may have positive impacts in the long term, as it may bring more respectability to the industry as it matures.
"But in the short term this could affect volumes which have been one of the key drivers of the recent rally."
"The intentions of the Chinese state are clearer and it looks like they're trying to bring the Chinese bitcoin exchanges to heel - whether they are looking to make an example is yet to be seen."
Chinese investors dominate the global bitcoin volume trade. For some time, Chinese regulators have been concerned about bitcoin and whether it is having a negative effect on the renminbi.
Following the announcement, the digital currency fell from around $915 to as low as $784.56. Bitcoin is currently hovering around the $806 mark.
The price of bitcoin fell by around 10 percent after Chinese authorities announced plans to inspect bitcoin enterprises.
"Instead of 'we're watching' you it's now 'we're investigating' you," he told CNBC.
Charles Hayter, chief executive and founder of digital currency comparison website CryptoCompare, said today's announcement was a "ratcheting of the rhetoric" from the Chinese authorities.
The People's Bank of China published an announcement this morning that it will carry out site inspections on January 17 to check whether enterprises dealing in bitcoin have the correct licenses, have implemented anti-money laundering systems and whether there is market manipulation.
UBS CEO: Blockchain Is 'Almost A Must' for Business
The CEO of Swiss financial services giant UBS Group AG endorsed blockchain technology in an interview, suggesting that it is "almost a must" for business.
Sergio Ermotti told CNBC Monday that the t
A 'Crypto Shopping Mall' Is Being Tested in Slovenia
A major shopping center based in Slovenia is widening a cryptocurrency payments pilot.
BTC City Ljubljana, located in Slovenia's capital of Ljubljana, will allow a group of 150 people to use crypto
Under $100: Litecoin Price Hits Fresh 2018 Low
The price of litecoin (LTC), the world's sixth largest cryptocurrency by market capitalization, fell to a fresh 2018 low on Wednesday.
Data from Bitfinex shows the cryptocurrency slipped to $97.0
Beyond Bitcoin: Thomson Reuters Data Now Tracking Top 100 Cryptos
Mass media and data giant Thomson Reuters is expanding its cryptocurrency sentiment data toolkit to cover 100 different coins, the company announced Wednesday.
Initially launched back in March, the
JD.com's Finance Arm to Issue Asset-Backed Securities on a Blockchain
JD Finance, a subsidiary of Chinese e-commerce giant JD.com, announced on Wednesday that it is planning to issue asset-backed securities (ABSs) on a blockchain.
According to a report from the Secur
Bitcoin Bulls Eye $6K Bottom After 4-Month Low
Bitcoin is still looking south, having hit four-month lows today, but the bearish momentum may wane due to short-term oversold conditions, the technical charts indicate.
More bears joined the party
Blockchain Is 'Revolutionary,' Says German Finance Regulator Chief
Felix Hufeld, chief of Germany's financial watchdog, has said blockchain technology is "revolutionary" and its applications could turn the entire financial sector "upside down."
Hufeld, who is pres
Banks' Blockchain Budgets Spiked 67% in 2017, Survey Finds
The global financial services industry spent a combined $1.7 billion on blockchain development in 2017, with institutions having increased their individual budgets for the technology by 67 percent in