Crypto Alert: Why Are Bitcoin Prices Falling Today?
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Crypto prices have fallen around 8% in the last 24 hours. Especially market leaders Bitcoin (BTC-USD) and Ethereum (ETH-USD) are both down by about 9%. As of this writing, Bitcoin prices are trending around $21,500 per coin. Meanwhile, ETH is trading closer to $1,700.
This action – which has accompanied a fall in global stocks – wipes out a rally that had put BTC near the $25,000 mark on August 14. The coin had traded at $47,000 earlier in 2022, but Bitcoin prices fell as low as $17,700. in June. Per Decryptliquidations over the past 24-hour period are estimated at $540 million.
Initially, traders who thought the “crypto winter” was over may have been wrong. The groundhog seems to have seen his shadow.
Bitcoin Prices: Why Is This Happening?
Traders who thought cryptocurrency could protect value in a downturn are instead seeing digital assets trade like semiconductor stocks. For example, Nvidia (NASDAQ:NVDA) – whose chips are at the heart of many mining rigs – shares are currently down 40% so far this year.
Bankruptcies of exchanges such as Celsius and Voyager Digital has certainly hurt the market this summer. Exchange traded stock exchange Coin base (NASDAQ:COIN) is also down more than 65% year-to-date (YTD).
Crypto’s problems are compounded every time another exchange goes under. German exchange Nuri filed for insolvency at the beginning of August. Zipmex also filed for bankruptcy protection in Singapore in late July.
Now, Sam Bankman-Fried — the 30-year-old crypto billionaire and CEO of FTX — trying to buy up and consolidate the space, sort of JPMorgan (SNEEZE:JPM) saved the stock market in 1907. Venture capitalists have also tiptoed back into the crypto field.
What happens afterwards?
So, what should investors consider when Bitcoin prices fall?
Proponents liken crypto to cash, saying you can trust cryptocurrency more than the central banks that manage the dollar, euro and yen. But there isn’t much behind BTC beyond scarcity, the fact that there can only be 21 million answers to its cryptographic puzzle.
If your bank fails, the Federal Deposit Insurance Corporation (FDIC) provides insurance for your account, up to $250,000. But there is no FDIC in crypto. As long as crypto remains buyer beware, investors should be cautious.
At the time of publication, Dana Blankenhorn held a long position at NVDA. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Guidelines for publication.
