China's latest crackdown on bitcoin will likely shut down the local industry around the digital currency for good, several analysts said.

"I see the crackdown on bitcoin as part of this larger multi-agency program to reduce financial sector risk, which will unfold over months and probably years," said Jim Stent, author of "China's Banking Transformation." "I do not see risk reduction as something temporary prior to the [Communist Party Congress], nor do I see the bitcoin crackdown as temporary."

The 19th National Congress of the Communist Party of China is scheduled for October 18, and Beijing typically tightens its scrutiny on sensitive areas such as access to Google. However, most analysts who spoke with CNBC said authorities' latest moves on cryptocurrencies reflect Chinese President Xi Jinping's long-term efforts to reduce speculation in financial markets.

On September 4, the People's Bank of China announced a ban on digital token fundraisers called initial coin offerings. Then last week, several major Chinese bitcoin exchanges including BTC China announced they would end trading by the end of the month amid reports Chinese regulators planned to shut down the exchanges.

The news sent bitcoin tumbling 41 percent from a record high above $5,000 at the beginning of September to a low of $2,951 Friday, according to CoinDesk. The digital currency recovered to trade around $3,884 Tuesday and has still quadrupled in value for the year.

Bitcoin one-month performance

Source: CoinDesk

The Chinese crackdown on bitcoin is "much more massive" than most of China's financial regulatory action in the past, including on shadow banking, said Martin Chorzempa, research fellow at the Peterson Institute for International Economics.

His view on the clampdown has turned grimmer in the last few days. On Friday he published an article on the Peterson Institute's website that said the clampdown "should be temporary," but given the latest news reports, Chorzempa told CNBC Tuesday that he would "potentially revise" his expectations.