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A year ago it seemed bitcoin could do no wrong.
On Dec. 17, 2017, the cryptocurrency hit its all-time-high of $20,000 on industry site CoinDesk's price index. Two financial exchanges opened bitcoin futures markets, a move hailed as a step toward legitimizing the currency in the eyes of Wall Street, and waves of amateur investors sought to buy into the frenzy.
In a particular show of optimism, one analyst predicted bitcoin prices would rise all the way to $100,000 in 2018.
That didn't happen. Instead, bitcoin and other digital coins plummeted this year, punishing portfolios and sowing doubt about the future of cryptocurrencies.
What happened? In short, the specter of regulation and investor skittishness rocked the market.
The price collapsed, wiping out billions
Bitcoin's price is famously volatile, often swinging thousands of dollars in either direction in a single day. But that didn't prepare investors for what happened after the peak. Bitcoin's price retreated for the rest of 2017 and ended the year at $12,993, according to CoinDesk.
Then came 2018. The currency lost 51 percent of its value between Jan. 1 and Feb. 6, wiping out billions of dollars in market value.
Blockchain Intelligence Group president Shone Anstey attributed the steep drop to skittish investors who bought in during the price craze and then unloaded it as the price began to fall.
"The fear of missing out turned into the fear of losing," Anstey said. "You had a lot of fast money rushing in. Now we have fast money exiting out."
The launch of the futures markets, which allow investors to swap contracts to buy and sell bitcoin at a set price on a later date, also played a role in the price drop, Anstey said.
“It was a perfect opportunity for Wall Street to start shorting it,” Anstey said.
Government regulations also weighed on the currency. In January, bitcoin prices plunged 19 percent when South Korea’s finance minister said the country was considering shutting down virtual currency exchanges. In March, the currency fell below $10,000 after the Securities and Exchange Commission announced the requirement that digital asset exchanges must register with the agency.
“The incremental regulation snapped energy from the whole cryptocurrency space,” DataTrek Research analyst Nick Colas said. “There was an expectation that we have this new technology and we have a new financial ecosystem. And regulators said not so fast.”
Bitcoin never regained its highs. It spent most of the rest of the year trading between $6,000 and $9,000. Then in late November, the bottom fell out, as bitcoin's price plummeted below $6,000.
All told, the currency lost 84 percent of its value between Dec. 18, 2017 and Tuesday. As of Dec. 18 at 4:30 p.m., it's valued at just $3,525.05, per Coindesk.
While those who bought at the start of 2017 saw staggering returns, investors who came in later have seen their portfolios dwindle.
One novice investor, Ryan Lackey, started buying cryptocurrencies in December. Lackey, who works as a project coordinator for a document scanning service in California, put $1,500 into alternative currencies Ripple, Tron, and Stellar beginning on Dec. 17, 2017.
At first, his portfolio rose as high as $5,000. But then Lackey converted his entire portfolio to bitcoin right as the price began falling.
"I sold it all into bitcoin because bitcoin's king and I've been writing it down ever since," Lackey said.
Through trades and dwindling currency prices, Lackey estimates his portfolio is down 90 percent since his initial investment.
Lackey said he views the year as a learning experience. He says he’s made friends in the bitcoin community, and he continues monitoring the market in the hope that the prices will rebound.
"I'm definitely in it for the long term," Lackey said. "I'm really hopeful that there's going to be another big bull run. I know I'll make money in a legit bull run."
Lackey considers himself lucky, saying that he could afford to lose his investment. But for those who couldn’t afford the losses, the crash was devastating. In South Korea, where more than two million investors took a chance on digital currencies, young people struggled to cope with the price crash.
And Saxo Bank's Kay Van-Petersen, the analyst who predicted bitcoin $100,000? He doesn’t talk about bitcoin anymore.
"Saxo has [a] policy of not commenting on Bitcoin/Crypto since [January] this year," Van-Petersen wrote in an email to NBC News.
General interest fizzled
As bitcoin's price fell, so did interest from the general public.
You can see the currency's fall from public interest at Grace News, a convenience store in New York City that has housed a bitcoin ATM for more than four years. The ATM, which is tucked away in a back corner of the shop, was heavily trafficked in late 2017, according to shop clerk Yeasim Rashid.
"Every five minutes people would come through, Rashid said. "As soon as I opened the door, people were waiting outside."
Now? Rashid estimates that maybe five or six customers stop by per day.
"It's cooled this year," Rashid said.
Demand for mining equipment drives up computer component prices
Bitcoin's price peak coincided with a surge in interest in “mining” cryptocurrencies. To mine bitcoin, computers compete to solve complex mathematical equations. Mining requires powerful computer hardware and miners bought them in droves, driving up prices.
Philip Carmichael, owner of PCPartPicker.com, a computer-builder enthusiast site, noted a spike in the price of computer motherboards and graphics cards that began in January 2018. The spike continued through March when Carmichael said prices usually come down.
"During the peak, it was hard to purchase a video card if you wanted to," Carmichael said.
"There were posts on our hardware forums of people buying one hundred graphics cards from a store," said PCPartPicker.com site technical specialist Ryan Marinelli.
The ICO bubble that burst
Bitcoin's big first quarter drop didn’t dampen the hype around initial coin offerings (ICOs), splashy opening sales of new cryptocurrencies typically used to raise money for start-ups. Investors, hoping either to find the next bitcoin or spend the currency on the start-up's product, spent $17 billion on ICOs in 2018, according to CoinDesk.
ICOs reached a fever pitch in the middle of the year when tech start-up Block.one raised $4 billion in the ICO for its coin, eos.
For the businesses offering the coins, ICOs were a quick way to make money. But it was a risky buy for investors. A Wall Street Journal analysis of 1,450 coin offerings found that nearly 20 percent showed signs of fraud, including plagiarized documents or false executive information.
"There were very credible reports of massive fraud in the ICO market," Colas said.
The SEC responded to the ICO boom by increasing scrutiny on coin offerings. In November, the agency levied $250,000 in penalties each to two cryptocurrency companies for failing to register their tokens with the agency. The agency also fined boxer Floyd Mayweather and musician DJ Khaled hundreds of thousands of dollars for failing to disclose money they were paid to promote ICOs.
"We're really seeing the death of the ICO," Anstey said. "It's no surprise that the SEC is going after them and is going after the promoters. They're creating a lack of confidence in the system."
Is bitcoin dead? Or will it bounce back?
While experts are positive about blockchain, the technology behind bitcoin, they are divided about the future of the coin itself. Some, like Erik Finman, a teenager who became a millionaire by investing in bitcoin last year, are bearish. Finman told MarketWatch Bitcoin is doomed.
“Bitcoin is dead, it’s too fragmented, there’s tons of infighting I just don’t think it will last,” Finman said.
Others see a future, but not at last year's sky-high prices. In a December note to clients, Bloomberg Intelligence analyst Mike McGlone predicted that bitcoin would return to $1,500, but that a decline in price volatility and a focus on stability had begun.
"Prices for bitcoin and others are likely to weaken to levels seen at the onset of the 2017 frenzy and remain on track toward becoming proper currencies, in our view," McGlone wrote.
Anstey said that bitcoin would continue to thrive, especially in countries dealing with low-value currencies or severe inflation.
"The volatility is relative. Think about it compared to Venezuela, Chile," Anstey said. "When we get out of our sandbox, we see it has a large future ahead of it."
CORRECTION (Dec. 19, 2018, 11:07 a.m. ET): An earlier version of this article misspelled the name of a celebrity who was fined for failing to disclose that he had been paid to promote initial coin offerings. He is DJ Khaled, not DJ Kahled.