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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I'm Caroline, and this

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Speaker 1: is Here's Why, where we take one news story and

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Speaker 1: explain it in just a few minutes with our experts

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Speaker 1: here at Bloomberg. Notoriously volatile, cryptocurrency has long been seen

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Speaker 1: as a niche investment on the verge of going mainstream,

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Speaker 1: but increasingly digital tokens are being integrated into traditional finance.

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Speaker 1: The US approved the sale of exchange traded funds linked

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Speaker 1: to bitcoin in January, with those ets now pulling in

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Speaker 1: hundreds of millions of dollars in daily inflows. Plus, Bitcoin

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Speaker 1: has jumped about fifty percent so far this year, and

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Speaker 1: Donald Trump, a former crypto critic, has adopted a much

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Speaker 1: friendlier stance towards crypto in recent weeks in the US

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Speaker 1: presidential race.

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Speaker 2: We're extremely encouraged by what we've seen from Donald Trump

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Speaker 2: and his campaign over the past couple of months. He's

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Speaker 2: embraced cryptocurrency frankly, has met with many people in the

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Speaker 2: industry and you know, had several events where you building

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Speaker 2: that knowledge and come out, you know, very positively towards cryptocurrency,

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Speaker 2: which we absolutely embrace.

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Speaker 1: Given all the interest. Regulators also catching up trying to

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Speaker 1: protect some retail investors. So here's why it's now easier

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Speaker 1: than ever to buy crypto. Our cross asset reporter Emily

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Speaker 1: Graffeo is here to explain. Emily great to speak to you.

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Speaker 1: Should we start with the basics when we talk actually

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Speaker 1: about cryptocurrency. What are most people trading now and how

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Speaker 1: are they investing in it?

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Speaker 3: So really what we're seeing now is people are either

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Speaker 3: buying coins like bitcoin or Ether, and they're doing this

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Speaker 3: through brokerage accounts like coinbase that's an app that you

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Speaker 3: can use to buy crypto, or the buying exchange traded funds,

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Speaker 3: which recently in the US we've seen exchange traded funds

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Speaker 3: that track both the direct price of bitcoin and the

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Speaker 3: direct price of Ether, and that's really for people who

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Speaker 3: don't want to go through all the hoops to buy

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Speaker 3: the coins directly.

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Speaker 1: So then we're not quite in the early adopters stage.

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Speaker 1: Oh wait, is cryptocurrency they fully integrated into institutional finance.

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Speaker 3: We're not in the early adopter's phase, but I would

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Speaker 3: hesitate to say that we're fully integrated. Crypto still has

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Speaker 3: a reputation for being technical and complex, and honestly also

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Speaker 3: still a place where there's a lot of scandals and fraud,

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Speaker 3: and I think that's why the ETFs are so popular.

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Speaker 3: They almost bring a sense of comfort to investors who

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Speaker 3: maybe we're too nervous to deal in crypto before. Now

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Speaker 3: these ETFs are issued by legacy financial institutions, think Fidelity, Blackrock.

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Speaker 3: They have that label associated with them now, and that's

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Speaker 3: brought newer investors into the space.

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Speaker 1: So then why did the SEC, the US regulator, actually

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Speaker 1: allow the ETF in the first space, Because it's also

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Speaker 1: quite novel.

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Speaker 3: Isn't it. It was a long road to get these

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Speaker 3: funds actually trading in the market. Ultimately it came down

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Speaker 3: to a legal battle between the Securities Exchange Commission and

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Speaker 3: the industry. The SEC was basically in a position where

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Speaker 3: they had to move forward and greenlight the funds, and

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Speaker 3: we saw in January the bitcoin funds launched and just

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Speaker 3: last week the ether funds launched.

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Speaker 1: There's also a political angle. The sector has emerged as

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Speaker 1: being quite influential potentially in the presidential election. Trump is

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Speaker 1: sounding more favorable towards it. Jd Vance is apparently also

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Speaker 1: quite in favor. Is bitcoin a proxy for a Trump victory?

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Speaker 1: Has there been any action around the presidential race to

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Speaker 1: do with cryptocurrency.

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Speaker 3: It's hard to expel blain bitcoin's price movements because that's

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Speaker 3: one of my jobs here at Bloomberg, and I try

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Speaker 3: to do that a lot, and it's very difficult. But

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Speaker 3: I will say several weeks ago, when it became clear

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Speaker 3: that Trump was leading in the polls, we did see

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Speaker 3: a rally in bitcoin, and a lot of crypto industry

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Speaker 3: participants typically favor the Trump ticket over some of these

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Speaker 3: Democratic lawmakers have sounded a little bit more harsh on crypto,

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Speaker 3: But we'll really have to see what happens if Trump

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Speaker 3: is elected. If there are any actually crypto favorable policies enacted,

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Speaker 3: that's unclear if we'll see that yet.

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Speaker 1: A lot of people also thought that crypto might not

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Speaker 1: survive the collapse of ftx so that was the third

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Speaker 1: largest digital currency exchange in the US. It collapse in

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Speaker 1: twenty twenty two. A lot of people might have followed

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Speaker 1: Sam Bankman Freed, who is the co founder, and he

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Speaker 1: ended up being sentenced to twenty five years in jail.

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Speaker 1: Has that been a lot of damn image from that

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Speaker 1: or has the industry moved on from that case?

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Speaker 3: I would point to the success of the bitcoin and

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Speaker 3: ether ETFs as maybe we can call it a glimmer

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Speaker 3: of hope that the industry has rebounded somewhat. Like you

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Speaker 3: said at the beginning of the show, there's been billions

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Speaker 3: of dollars flowing into these only three ETFs have taken

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Speaker 3: in more money this year than black crocs, Bitcoin ETF

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Speaker 3: It's taken in over seventeen billion dollars in flows. So

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Speaker 3: this has been a success story in twenty twenty four,

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Speaker 3: these crypto ETFs, despite everything that did happen with the

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Speaker 3: collapse of FTX and SBF.

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Speaker 1: Do you think the culture has changed.

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Speaker 3: I think a lot of that anti establishment, anti Wall

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Speaker 3: Street sentiment is still alive. And you know, it's interesting

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Speaker 3: ETFs actually have some spirit of that as well. ETFs

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Speaker 3: were created it as a vehicle for everyday people to

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Speaker 3: make money, so you didn't have to be just you know,

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Speaker 3: an important person on Wall Street to see your investments grow.

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Speaker 3: And I think there are a lot of parallels between

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Speaker 3: that psychology in the ETF world and also in the crypto.

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Speaker 1: World, and so trading a ETF does feel then perhaps

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Speaker 1: distant from the original idea of decentralized finance. It is

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Speaker 1: something that was going to challenge actually the existing kind

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Speaker 1: of financial world. How to back as reconcile that.

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Speaker 3: Yeah, that's true. The people who came up with bitcoin,

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Speaker 3: they were trying to reject the financial system. Despite how

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Speaker 3: successful the bitcoin ETFs have been this year, it's nowhere

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Speaker 3: near the case that the ETFs are the majority of

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Speaker 3: the way that people are trading crypto. It's a big part,

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Speaker 3: like we said, billions of dollars of flows now, but

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Speaker 3: it's still not the main way that most crypto traders

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Speaker 3: are custodying and trading in these assets. Whether or not

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Speaker 3: the ETFs become the dominant way that traders are investing

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Speaker 3: in crypto really depends on part whether these large financial

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Speaker 3: institutions choose to embrace crypto. Think pensions, endowments buying these

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Speaker 3: bitcoin and ether ETFs. We've seen a little bit of that,

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Speaker 3: but we're nowhere near like we said earlier, like a

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Speaker 3: full integration of traditional finance and crypto.

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Speaker 1: Emily, thank you. That is our cross asset reporter Emily Graffeo.

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Speaker 1: For more explanations like this one from our team of

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Speaker 1: two thousand, seven hundred journalists and analysts around the world,

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Speaker 1: search for quick take on the Blueberg website or Blueberg

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Speaker 1: Business app. I'm Carolyn Hebkere. This is his why. I'll

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Speaker 1: be back next week with more. Thanks for listening.