Bitcoin had been coasting in recent months on fairly low volatility until "things exploded" Wednesday and prices tanked more than 10 percent, BKCM founder and CEO Brian Kelly told CNBC.

Kelly, a cryptocurrency fund manager, said the sharp downturn had to do with bitcoin cash, which splintered off in August 2017 from regular bitcoin with the goal of being able to process more transactions.

Bitcoin cash is doing a "hard fork" or "effectively a software upgrade," Kelly said on "Fast Money." "When you do a software upgrade, everybody usually agrees. But in this particular case, everybody is not agreeing."

"So, we've got ourselves a 'crypto civil war,'" he said, adding that some traders are concerned the bitcoin and bitcoin cash markets would run into a slowdown or "chaos" after the software upgrade.

"People started selling. That triggered stops. Everybody got concerned," Kelly explained. "And that's what happened today — the entire market sell-down."