Understanding the cryptocurrency market collapse reasons is crucial to grasp why the market fell sharply after the optimism in fiscal 2017. The crypto market capitalization dropped from over $800 billion at the start of the year to $150 billion now. These losses of 80% over the past 11 months were driven by bearish sentiments and lower-than-expected adoption of crypto coins.

Bitcoin lost all the gains it made during last year’s bull run. The largest crypto coin now trades near its lowest level in 14 months.

Here are the Reasons for the Steep Fall:

Relying on Unregulated Infrastructure and Exchanges is Risky

Cryptocurrency markets are largely unregulated, which has been allowing people to use unfair trading techniques. The reports of price manipulation activities, scams, and frauds are also adding to bearish sentiments.

Bitfinex, for instance, had aided the group of a few investors to create a proprietary cryptocurrency called Tether that they have used to falsely pump up prices. Several other cryptocurrency exchanges were also involved in illegal activities over the past couple of years.

Regulators are Cracking Down

Governments all around the world are showing their concerns over the sudden rise in crypto markets, which they believe are helping criminals in money laundering practices.  It’s better to add an AML Compliance Program. Some countries, like China, have completely banned crypto platforms while others are creating a legal framework to control illegal activities.

According to researched reports, money that is used for illegal practices accounted for almost half of the trading volume when crypto markets were trading at an all-time high. Therefore, the crackdown from regulators has been hurting crypto market volume and prices.

Lower than Expected Crypto Adoption

Although the world has been admiring and applauding the blockchain innovation, the majority of people didn’t completely comprehend the idea of centralized digital currencies. The huge amount of volatility in crypto prices has also been hindering their potential to work as a medium of exchange. A lack of interest from big names in Wall Street is adding to bearish sentiments.

Conclusion

One of the key cryptocurrency market collapse reasons is that these markets are largely unregulated and immature. This immaturity causes massive price movements driven by speculation and market reports. However, the increasing role of regulators could help crypto exchanges comply with fair trading policies and improve trader sentiment. Overall, the emerging digital market may face short-term uncertainty due to a lack of investor confidence and shrinking trading volumes.

Which factors in your opinion have negatively impacted crypto markets? Express your thoughts in the comments section below.