Bitcoin dropped Thursday to trade below $9,000, a critical level of support that many analysts are watching. The decline followed reports that raised worries about increased regulation in India and potential price manipulation at a major exchange.

The digital currency fell nearly 13 percent to a low around $8,810 in late morning trading, ET, on Coinbase, the leading U.S. marketplace for trading major cryptocurrencies. For about 40 minutes, Coinbase also reported issues with a provider of SMS 2-factor authentication that was impacting "user sign-in, signups, and confirmations for sensitive actions," according to the company's status website.

Bitcoin recovered slightly in afternoon trading to just above $9,100.

CoinDesk's bitcoin price index, which tracks prices from four major cryptocurrency exchanges including Coinbase, also briefly fell below $9,000 and was trading near $9,152 as of 3:55 p.m., ET. CME's and Cboe's bitcoin futures contracts for February both fell below $9,000 as well and hovered around $8,900 in afternoon trading.

Bitcoin performance in the last 24 hours

Source: Coinbase

The drop came after comments from India's minister of finance, Arun Jaitley, that raised concerns about increased regulation on cryptocurrencies in the country.

The New York Times also reported Wednesday that an increasing number of digital currency investors are worried the price of bitcoin and other digital currencies have been inflated by cryptocurrency exchange Bitfinex, which is included in CoinDesk's price index. Bloomberg reported Tuesday that in December, the U.S. Commodity Futures and Trading Commission subpoenaed Bitfinex and a cryptocurrency company called Tether, which is run by many of the same executives.

Representatives for Bitfinex and Tether did not immediately respond to a CNBC request for comment.