New York CNN Business  — 

The recent plunge in the stock market is a cakewalk compared to what’s going on with cryptocurrencies. Bitcoin prices are down more than 15% in just the past week and have plummeted nearly 70% so far this year.

Bitcoin hit a peak above $19,000 in December 2017. Its is now trading at around $4,600.

Shares of companies with ties to the crypto market have plunged lately too, including chipmakers Nvidia (NVDA) and AMD (AMD), which make graphics cards used by bitcoin miners. Online retailer turned blockchain investor Overstock (OSTK) and digital payments firm Square (SQ) are also sharply lower. Each stock is down between 15% and 35% in just the past month.

So it seems safe to say that the bitcoin bubble has burst. Should investors start to dip their toe back in to bitcoin and other crypyto-related assets?

Perhaps. Some bitcoin bulls are welcoming the recent volatility. It may be scaring away some of the momentum investors who rushed in, which means that bargain hunters can scoop up bitcoin at a more attractive price.

“Savvy investors understand that digital currencies are the future of money and, as such, they will be capitalizing on the lower prices in order to build their portfolios and shore-up their positions,” said Nigel Green, CEO of deVere Group, a financial advisory firm.

Green compared the current shakeout to what happened with the dot-com boom and subsequent bust in the late 1990s. Many internet stocks crashed and burned, but Amazon (AMZN) is proof positive that e-commerce turned out to be a legitimate business and not just hype.

“Financial traditionalists view cryptocurrencies the way traditional stores used to view online retailers,” Green said. “Crypto cynics are using this current wave of volatility to knock digital currencies. Whether it is Bitcoin, or any of the current generation of coins, or not, cryptocurrencies are here to stay.”

SEC keeping a close eye on fishy ICOs

There’s also a more technical, wonky reason for why bitcoin is falling.

In the past year, bitcoin has gone through a splitting process known as a fork. The first fork created bitcoin cash – and bitcoin cash has now recently split into two other forks as well. For the average investor, this basically just means more volatility.

But there are still some potential problems for bitcoin and the legion of other cryptos out there, such as ethereum, litecoin, ripple and stellar. Their prices have all plunged lately too.

Part of the problem is a bubble mentality. Short-term investors are all trying to get rich quick with these cryptocurrencies as well as initial coin offerings or ICOs. Those are securities backed by crypto assets.

But they are incredibly risky. And the Securities and Exchange Commission is starting to crack down on ICOs that don’t pass regulatory muster.

Just last week, the SEC fined two companies $250,000 each for failing to follow the proper laws for registering securities. One of the firms, Paragon, is working to legalize cannabis – proving that it’s possible to combine two investing manias in one company.

“The SEC reminded the crypto world that it has the final say over anything that smells like a security,” said Naeem Aslam, chief market analyst with Think Markets UK. “The fear is that the SEC may not stop here and might take similar action against several companies that adopted a similar path.”

Regulatory issues may be just the tip of the iceberg as well. Anthony Pompliano, a partner with crypto investing firm Morgan Creek Digital, wrote in a recent blog post that some crypto hedge funds may be forced to shut down due to the dramatic drop in prices.

He argued that many firms won’t be able to raise more capital and won’t be able to survive.

“The current bear market is going to go from bad to worse very quickly for both crypto funds and ICO projects. The pain ahead is something that many of these entrepreneurs and fund managers have never had to deal with,” Pompliano wrote.

But he sees light at the end of the tunnel. Pompliano believes that the current shakeout is necessary. It will rid the market of the weak hands and leave only true crypto believers – as opposed to traders – left to prosper from the continued overall growth in the crypto world.

“Things will get much worse before they get better. That is okay. Remember, bear markets get rid of the tourists so that the true entrepreneurs can focus on building sustainable value,” Pompliano wrote.