Within a \Lambda Cold Dark Matter ( \Lambda CDM ) scenario , we use high resolution cosmological simulations spanning over four orders of magnitude in galaxy mass to understand the deficit of dwarf galaxies in observed velocity functions . We measure velocities in as similar a way as possible to observations , including generating mock HI data cubes for our simulated galaxies . We demonstrate that this apples-to-apples comparison yields an “ observed ” velocity function in agreement with observations , reconciling the large number of low-mass halos expected in a \Lambda CDM cosmological model with the low number of observed dwarfs at a given velocity . We then explore the source of the discrepancy between observations and theory , and conclude that the dearth of observed dwarf galaxies is primarily explained by two effects . The first effect is that galactic rotational velocities derived from the HI linewidth severely underestimate the maximum halo velocity . The second effect is that a large fraction of halos at the lowest masses are too faint to be detected by current galaxy surveys . We find that cored dark matter density profiles can contribute to the lower observed velocity of galaxies , but only for galaxies in which the velocity is measured interior to the size of the core ( \sim 3 kpc ) .