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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 winterwas over may have been mistaken. The groundhog seems to have seen his shadow.

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).

Cryptos problems are compounded each time another exchange goes under. German exchange Nurifiled 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:JPM)saved the stock market in 1907. Venture capitalists have also been tiptoeing back into the crypto field.

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 theres 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.

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Crypto Alert: Why Are Bitcoin Prices Plunging Today? - InvestorPlace