Ether, the currency of the Ethereum network, has plunged 9 percent over the last 24 hours. The virtual currency is now worth about $290—the first time it has been below $300 this year.

The declining price is part of a broader cryptocurrency sell-off that saw most major cryptocurrencies lose value over the last 24 hours. And it's part of a longer-term trend that has seen the gradual deflation of last year's cryptocurrency bubble.

Bitcoin, the world's most valuable currency, has lost only 1 percent of its value over the last 24 hours. But it has drifted steadily downward this year, falling from a high of almost $20,000 in mid-December to $6,250 today.

Ether has seen an even more dramatic decline, plunging from $750 at the start of the year—and a high of $1,400 in mid-January—to $290 today.

Litecoin is down about 4 percent over the last 24 hours to $56. It's down more than 80 percent from its January high above $300.

What’s driving the cryptocurrency bust?

The answer to this is as mysterious as what drove the virtual currencies to such heights last year.

In 2017, the cryptocurrency world seemed to be in the midst of a classic speculative bubble. More and more people heard about the huge gains enjoyed by earlier cryptocurrency investors and decided to buy some themselves in hopes of reaping similar gains. That drove skyrocketing valuations to major cryptocurrencies like bitcoin, litecoin, ether, and Bitcoin Cash.

The 2017 speculative boom was driven in part by the spectacular success of "initial coin offerings." Little-known cryptocurrencies were offered to the public for the first time in the summer and fall of 2017, and many of them fetched millions—in some cases tens or hundreds of millions—of dollars.

These sales often used bitcoin or ether as their media of exchange, pushing up bitcoin and ether prices. The rising value of bitcoins and ether then attracted still more people who wanted to try their hands at buying exotic cryptocurrencies in the hopes of identifying the next hugely valuable cryptocurrency.

But that process ran out of steam in early 2018. And ever since then, the process seems to have run in reverse. People have continued holding initial coin offerings, but few have posted the kind of spectacular gains earned by ICO participants in early and mid-2017.

Investor interest flagged, and the price of major cryptocurrencies stopped rising. With prices no longer hitting new records, media interest has declined, removing a major source of new users. The price started to fall, sparking more pessimism.

It's important to note that cryptocurrencies have had down markets before. Bitcoin has gone through at least two major bear markets in the past: one in late 2011 and the other in 2014. In both cases, people who bought at the peak suffered major losses. But eventually, bitcoin's price started to turn around and growth resumed. Ultimately, in 2017, bitcoin's value soared to values far above those reached in previous booms. And other cryptocurrencies soared along with them.

So it's possible that this process will be repeated again—that the market will eventually turn around and prices will start rising again. The big question, however, is whether there's really room for another big boom. The 2011 and 2013 bitcoin booms largely took place below the radar of mainstream discussion. The 2017 bitcoin boom, in contrast, was widely discussed.

At this point, almost everyone has heard of cryptocurrency, and most people who were interested in investing have already done so. Which means that there might not be a large pool of potential new investors to drive another boom.

Which means that cryptocurrency's long-term value ultimately depends on finding practical applications for the technology. If bitcoin, ether, or other cryptocurrencies become the foundation for new mainstream payment networks or other useful applications, that will naturally drive demand for cryptocurrencies and push up their price. If such applications don't emerge, on the other hand, then prices could continue declining for quite a while.