Look out below -- cryptocurrencies are plunging once again.

Last year, virtual currencies couldn't be stopped. Their aggregate market cap increased by more than 3,300% from where the year began, ending at $613 billion. By the end of the first week of January 2018, the combined market cap had soared to an all-time high of $835 billion. Then the wheels fell off the wagon. Between Jan. 7 and Feb. 6, the crypto market cap would fall by two-thirds, to a low of $276 billion. It was the first of what's been numerous hiccups for the digital currency movement this year.

The latest hiccup began on Feb. 17, after virtual currencies nearly doubled in value following the aforementioned Feb. 6 low, and culminated in a $60 billion market value wipeout on March 14 to a low of $310 billion. That's $210 billion lost (40%) in just four weeks, according to CoinMarketCap.com.

A physical gold bitcoin surrounded by a plunging red line, circuitry, and binary code.

Image source: Getty Images.

There's a big difference with this cryptocurrency plunge

However, this latest push lower is considerably different than the shellacking cryptocurrencies experienced in January and early February. This time it isn't bitcoin, the most valuable cryptocurrency in the world by market cap, leading the way lower -- it's everything else.

In all fairness, risks and concerns have emerged that have hit the entire virtual currency market. For example, Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) subsidiary Google announced that it would be following in the footsteps of social media giant Facebook (NASDAQ:FB) by banning cryptocurrency ads and anything related to ICOs. While Facebook announced its effective ban back in late January, search giant Google just announced its decision within the past few days. The official ban on Google's ad platform won't officially kick in until June 2018. Removing access to potentially billions of impressions could prove detrimental to attracting new cash into the crypto market. 

There have also been increasing concerns about a step up in regulation surrounding virtual currencies. Even though bright spots emerged in 2017, such as Japan allowing bitcoin to be accepted as a form of tender, and both the CME Group and CBOE Global Markets offering bitcoin futures trading on their platforms, an increasing amount of regulation is viewed by some cryptocurrency investors as a threat to anonymity, which has been a major selling point of digital currencies.

But the real standout over the past four weeks has been the underperformance of non-bitcoin tokens relative to bitcoin. Even though bitcoin has performed poorly and lost about $4,100 per coin from peak to trough between Feb. 17 and March 14, a decline of 34%, the aggregate market cap of all other virtual currencies, not including bitcoin, has plunged from $328 billion to a low of $178 billion, representing a dive of nearly 46%.

A bespectacled man looking worriedly at a plunging chart on his computer monitor.

Image source: Getty Images.

These virtual currencies have been steamrolled over a four-week span

What cryptocurrencies have been the biggest drags on the market? Here's a brief rundown of a few of the biggest underperformers:

  • IOTA (-52%): IOTA exploded onto the scene in November when the IOTA Foundation announced the beta launch of its Data Marktetplace, which is a blockchain-based marketplace where businesses can share or sell data that would otherwise go unused. IOTA also attracted numerous high-profile participants to test its network. However, IOTA's network has struggled with capacity at times, with processing times slowed to a crawl.
  • Ripple (-47%): Bottle rocket Ripple, whose token, the XRP, surged more than 35,500% in 2017, has struggled mightily in 2018. Despite partnering with MoneyGram International and a host of other financial services companies, Ripple has yet to see its network be deployed on a large scale.
  • Cardano (-58%): Cardano, the self-proclaimed third-generation cryptocurrency and blockchain project that exploded onto the scene in December and once carried a more than $30 billion valuation, has lost 58% of its value over the past four weeks. A lack of major partners and real-world testing has allowed initial interest in this "sustainable cryptocurrency ecosystem" to fizzle out.
  • Dash (-47%): Privacy coins like Dash, which go above and beyond the perceived anonymity of cryptocurrency transactions to obfuscate the sender and receiver of funds, as well as the amount being transmitted in some cases, have been slammed recently. For instance, South Korea's new requirement that banks verify the identities of members before their accounts can be linked to cryptocurrency exchanges was a major blow to Dash and its ilk. 
Binary code and blockchain nodes surrounding a digital outline of the continents.

Image source: Getty Images.

The real issue, in a nutshell

Even though everything not named bitcoin has been leading the charge lower in recent weeks, pretty much the entire crypto market faces the same challenge in 2018: overcoming the proof-of-concept stigma.

Casting aside bitcoin and Litecoin, which are the only major virtual currencies to be more focused on their coins being used as a medium of exchange rather than promoting their proprietary blockchain technology, every other digital currency is focused on getting businesses or crypto enthusiasts to use their blockchain. For those unfamiliar, blockchain is the digital, distributed, and decentralized ledger underpinning most cryptocurrencies that's responsible for recording all transactions without the need for a financial intermediary, like a bank.

On the surface, blockchain offers a number of critical advantages over the current payment system offered by banks. By eliminating banks from the equation and keeping blockchain transactions between a sender and receiver of funds, aggregate transaction fees should drop. Blockchain transactions also offer the potential to be validated and processed in real time or within a matter of seconds, even for cross-border payments. With today's banking networks, processing cross-border payments can take up to five business days.

However, blockchain has one massive drawback: It's a largely untested technology. Though businesses have been more than willing to test internally developed blockchains or partner with crypto-pinned blockchain projects, there haven't been any large-scale, real-world tests of blockchain. The Catch-22 is that no large enterprises will switch over to a blockchain-based platform if the technology is unproven, but the technology won't ever "prove" itself if no businesses are willing to try it. This is the proof-of-concept conundrum that the crypto market is currently stuck in. Blockchain appears to work marvelously in financial and noncurrency scenarios in small-scale tests, but no company has been willing to go all-in and use blockchain on a broad scale.

Unless we see a push beyond proof of concept in 2018, crypto valuations could continue to fall and/or be exceptionally volatile.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.