Why did the cryptocurrency market collapse after substantial optimism in fiscal 2017? The crypto market capitalization tumbled from more than $800 billion at the beginning of the year to $150 billion at present. The losses of 80% in the past 11 months received support from bearish sentiments and lower than expected adoption of crypto coins.

Bitcoin lost all the gains that it had generated during the past year’s bull run; the largest crypto coin currently trades around the lowest level in past 14months.

Here are the Reasons for the Steep Fall:

1. 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.

2. 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.

3. 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

Cryptocurrency markets are unregulated and immature. This is why these markets make massive price movement on speculations and market reports. The increasing regulator’s role, however, would help crypto exchanges in complying with fair trading policies and improving trader’s sentiments. On the whole, the emerging digital market could face short-term uncertainty amid lack of investor’s confidence and shrinking volumes.

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