The month of June has been tough on the world of cryptocurrencies, with the past week being especially harsh. It is difficult to pin down a single, specific cause behind the pullback, as a variety of new and nagging concerns about the viability of cryptocurrencies continue to mount.

As for the price action, Bitcoin dropped like a rock down below $30k this past week, less than half of what its high in the last year has been. The meme cryptocurrency Dogecoin lost over 60% of its value, down to $0.24 from a high of $0.72 earlier this year. Etherium has been cut in half, as have many other cryptocurrencies. The NFT market, whose enthusiasm has ridden on the back of the cryptocurrency mania, has also been down. The sales volume of NFTs has been down over 90% from its activity just the previous month.

So why the drop?

First, enthusiasm is slowing down. Even as cryptocurrencies become a more common household word, their usage for real-world, non-illicit transactions is practically nil. The viability of cryptocurrencies to replace assets is increasingly coming into doubt, since, despite the worldwide focus on them, they still don’t represent any meaningful usage of currency.

Second, doubts about the legitimacy of the Bitcoin markets themselves have been rising.  Making headlines, a pair of South African brothers vanished, taking with them a massive trove of other people’s Bitcoin worth over 3 billion dollars. As we have noted before, Bitcoin’s security actually works against ordinary users, who have to rely on third parties to transact on their behalf.

Beyond individual bad actors, there is growing concern about the way that the Bitcoin market operates generally. All currencies, including Bitcoin, trade with what are known as “trading pairs.” That is, since it is always money-for-money, the question is not how much Bitcoin costs in absolute value, but how much it costs relative to other currencies. Transacting Bitcoin with hard currencies is much more difficult than transacting with other cryptocurrencies. This has led to the growth of “stablecoins”, which are cryptocurrencies tied to the value of a specific underlying currency. The idea behind stablecoins is that they are near-100% backed by the given currency, and therefore can be freely used/interchanged with.

The most popular of the stablecoins is Tether, with the dollar-denominated tether going by the symbol USDT. However, questions about the governance of Tether, and the degree to which USDT is backed by actual dollars, have been growing over the years. Much of the meteoric rise of Bitcoin in 2017 was linked to the production of Tether tokens, with some evidence that these were produced without a corresponding influx of backing dollars.

While questions around Tether are old news, they have been growing. This year, Bitfinex, a company that is technically distinct, but highly intertwined with Tether, was sued by the New York Attorney General for (a) misleading investors about the amount of backing of Tether, and (b) mismanaging funds to cover up massive losses by the firm. They settled for an $18.5 million fine that did not require an admission of wrongdoing. Additionally, the SEC has been increasingly involved in cryptocurrency oversight, and rumors are circulating that Tether may be next in their sights.

The question then arises, if the rise of Bitcoin (and other cryptocurrencies) is denominated in Tether instead of dollars, but Tether is not actually fully backed by dollars, then to what extent is Bitcoin actually selling for the listed price? These questions have caused a lot of uncertainty in the degree to which prices of Bitcoin are actually reflective of market conditions.

Additionally, several big names have come out strong against cryptocurrencies in recent days. N. N. Taleb, author of Antifragile, released a paper critical of modern cryptocurrencies (including Bitcoin) titled “Bitcoin, Currencies, and Bubbles.” In the paper, Taleb criticizes Bitcoin for a variety of failings, saying, since Bitcoin doesn’t work as either a long-term store of value nor as a medium for exchange, that the present value of Bitcoin is effectively zero. Likewise, Michael Burry, made famous in the book and movie The Big Short for correctly predicting the 2008 market crash, said that he thinks that cryptocurrencies are setting the market up for the “mother of all crashes.”

On the positive side, El Salvador recently voted to make Bitcoin legal tender within the country, and Paraguay is drafting similar legislation for themselves. Whether or not Bitcoin becoming official as a means of payment will lead to a wider adoption for transactions remains uncertain.

In short, this week cryptocurrencies have faced a variety of headwinds, indicating that some of the enthusiasm of the past years is drying up. Whether the price goes up or down, the intrigue and questions surrounding the first wave of digital currencies don’t seem to be abating.