$300 billion.

Poof. Gone in 36 hours.

This week’s cryptocurrency market crash erased paper fortunes and likely churned a few stomachs belonging to new investors who had been piling into the space.

While the market has been in a frenzy over the past few months – with the majority of coins reaching all-time-highs while the market caps of cryptocurrencies with little technical development (Dogecoin) and niche business opportunity (Dentacoin) surged past $1 billion in network value – starting Tuesday morning, it began shedding weight.

Lots and lots of it, in fact. Most of the major cryptocurrencies saw double-digit drops continuing until Wednesday. The two most popular cryptocurrencies (and the two largest by market cap), bitcoin and ethereum, dipped below the psychological price levels surpassed last year – $10,000 and $1,000, respectively.

And XRP, the native cryptocurrency of enterprise blockchain startup Ripple Inc., lost nearly 50 percent of its value on Tuesday, after a month-long bull run that made the coin a retail investor darling and the apple of a startup’s eye.

As always, crypto-enthusiasts took to social media to restate their HODL-ing patterns and declare that this, in fact, is a great time to buy.

But others, who haven’t held on through the ups and downs of the last four-plus years, and might even have been some of the reason (i.e., panic selling) the markets tanked so hard, might be wondering what just happened.

And as the markets begin to regain some of their position going into Wednesday night, it’s hard to pinpoint anything specific, but there’s a confluence of events surmised to have driven the couple days of red.

Bitter taste of regs

By far, the most prevalent explanation is that harsh stances by governments in China and more recently, South Korea, led many investors to flee.

China, for one, has caused the markets to drop in the past. For instance, when the People’s Bank of China banned payment companies from working with bitcoin exchanges in 2013, the market immediately dipped.

And although there was some market clamor in September when China banned initial coin offerings (ICOs) and moved to shut down crypto exchanges in the country, the market for cryptocurrency trading has diversified significantly, and as such, the markets took far less time to recover.

More recently, though, South Korea regulators have been hammering on the crypto industry all month, with banks facing scrutiny over crypto exchange relationships and investors facing fines for anonymous trading accounts, the latter of which was disclosed on Monday.

Still, any news of strict regulation will “add pressure to the downside,” said Lanre Sarumi, CEO at risk management system providers Riskbone and the CEO of Leveltradingfield, which designed a game that allows people to place bets on the future price of bitcoin.

And Michael Graham, an analyst at Canaccord Genuity, an investment bank in New York, echoed that sentiment, saying that the regulatory rumblings have “helped people start to create more of a cautious narrative that’s sort of feeding on itself.”

Back to the futures?

Secondly – and perhaps interesting in its counterintuitiveness – is that far more technical people are a part of the cryptocurrency markets now, and according to Sarumi, that demographic shift of sorts could be exacerbating the downturn.

While the interest in cryptocurrencies by these sophisticated investors has been widely seen as a beneficial development, their use of complex market tools can have effects on the price that many in the crypto scene, especially novice retail investors, might not see as positive.

For instance, more experienced investors “are putting their stop loss triggers at support levels,” Sarumi said.

A stop loss is an order placed with a broker to sell an asset when it reaches a certain price. If a significant number of investors have stop losses around the same price, and if the price dips below that number, those sell orders are placed at once without demand on the other side. The sell-off could trigger others to panic sell, as they might think the market is crashing.

Sarumi continued:

“Once those levels are breached, the stop orders flood the market adding additional pressure to the downside.”

Plus, the debut of bitcoin futures on Cboe and CME last month was also viewed with optimism, as a sign of the industry maturing, but the expiration of the futures contracts this week was a source of some trepidation.

Because the futures product is so new, and the development of derivatives is key to the crypto markets’ maturation, some were “nervous about the first expiration,” Graham said. “If we can get through a few closings, it will give people confidence” in the crypto sector. (Earlier today, Cboe’s first bitcoin futures contract expired.)

In this way, there isn’t yet a huge number of institutional investors jumping in that would keep the market more stable.

Lights out at exchanges

The increased interest in cryptocurrencies has also put a strain on market infrastructure.

“Pretty much all the companies in the space are facing the influx of new users … and it’s taken a toll on most companies,” said Nejc Kodric, CEO of Bitstamp, a crypto exchange which has been around since 2011.

For one, several exchanges have stopped taking new users. Bitfinex, for example, temporarily curtailed account registrations in December “in a move designed to preserve the trading, support, and verification experiences of our existing, long-term user base,” the company said in a blog post last week. It said Friday it had resumed new account openings.

And further, many users of the U.S.-based crypto exchange Kraken were up in arms when a software upgrade, which was supposed to take two hours lasted nearly two days, halting trading for the same time period.

While most understand the ecosystem is still new and, as such, prone to problems, when market infrastructure goes down, many people get worried.

Adding further fuel to the fire, BitConnect announced it would close its lending and exchange platform, causing the company’s BCC token to crater and leaving holders at least temporarily unable to cash out.

Speaking to investors’ instinct over recent days to sell or at least stay on the sidelines, Graham concluded:

“Put all those together and it’s easy to create a narrative that ‘hey, the market’s kind of overheated and needs to take a break.'”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Kraken and Ripple.

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