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Crypto Alert: Why Are Bitcoin Prices Plunging Today?

  • Crypto leaders Bitcoin (BTC-USD) and Ethereum (ETH-USD) are down 9% over the past 24 hours.
  • Bankruptcies of major exchanges are hurting Bitcoin prices and the cryptocurrency market in general.
  • The crypto winter may not be over like some traders had hoped.
A Bitcoin coin frozen in ice.
Source: Shutterstock

Crypto prices are down about 8% over the past 24 hours. In particular, 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 — is wiping out a recovery rally that had put BTC closer to the $25,000 mark on Aug. 14. The coin had traded at $47,000 earlier in 2022, but Bitcoin prices fell as low as $17,700 in June. Per Decrypt, liquidations over the past 24-hour period are estimated at $540 million.

Basically, traders who thought the “crypto winter” was over may have been mistaken. The groundhog seems to have seen his shadow.

Bitcoin Prices: Why Is This Happening?

Traders who believed that 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 — has shares currently down 40% so far this year.

Bankruptcies of exchanges like Celsius and Voyager Digital have certainly hurt the market this summer. Publicly traded exchange Coinbase (NASDAQ:COIN) is also down more than 65% year-to-date (YTD).

Crypto’s problems are compounded each time another exchange goes under. German exchange Nuri filed for insolvency in early August. Zipmex also filed for bankruptcy protection in Singapore back in late July.

Now, Sam Bankman-Fried — the 30-year old crypto billionaire and CEO of FTX — is trying to buy up and consolidate the space, much like JPMorgan (NYSE:JPMsaved the stock market in 1907. Venture capitalists have also been tiptoeing back into the crypto field.

What Happens Next?

So, what should investors consider as Bitcoin prices fall?

Advocates compare crypto to cash, saying you can trust cryptocurrency more than the central banks who manage dollars, euros and yen. But there’s not 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) offers 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 wary.

On the date of publication, Dana Blankenhorn held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack.


Article printed from InvestorPlace Media, https://investorplace.com/2022/08/crypto-alert-why-are-bitcoin-prices-plunging-today/.

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