Regulatory policy changes in the cryptocurrency market significantly impact its dynamics. Stricter regulations, like enhanced KYC/AML requirements or outright bans, often trigger short-term price drops as investor confidence wavers and trading volumes decline. For instance, China’s 2021 crypto crackdown led to a sharp Bitcoin sell-off. Conversely, clear, supportive policies—such as the U.S. approving Bitcoin ETFs in 2023—can boost market sentiment, driving prices higher by attracting institutional capital. Uncertainty from pending regulations, like the EU’s MiCA framework, keeps markets volatile as traders speculate on outcomes. Regulatory shifts also affect altcoins differently, with compliance-heavy tokens gaining traction while privacy-focused ones face scrutiny. Ultimately, the interplay between regulation and market trends underscores crypto’s sensitivity to legal landscapes, shaping its adoption and valuation in real time.