Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I'm Caroline, and this
Speaker 1: is Here's Why, where we take one news story and
Speaker 1: explain it in just a few minutes with our experts
Speaker 1: here at Bloomberg. Notoriously volatile, cryptocurrency has long been seen
Speaker 1: as a niche investment on the verge of going mainstream,
Speaker 1: but increasingly digital tokens are being integrated into traditional finance.
Speaker 1: The US approved the sale of exchange traded funds linked
Speaker 1: to bitcoin in January, with those ets now pulling in
Speaker 1: hundreds of millions of dollars in daily inflows. Plus, Bitcoin
Speaker 1: has jumped about fifty percent so far this year, and
Speaker 1: Donald Trump, a former crypto critic, has adopted a much
Speaker 1: friendlier stance towards crypto in recent weeks in the US
Speaker 1: presidential race.
Speaker 2: We're extremely encouraged by what we've seen from Donald Trump
Speaker 2: and his campaign over the past couple of months. He's
Speaker 2: embraced cryptocurrency frankly, has met with many people in the
Speaker 2: industry and you know, had several events where you building
Speaker 2: that knowledge and come out, you know, very positively towards cryptocurrency,
Speaker 2: which we absolutely embrace.
Speaker 1: Given all the interest. Regulators also catching up trying to
Speaker 1: protect some retail investors. So here's why it's now easier
Speaker 1: than ever to buy crypto. Our cross asset reporter Emily
Speaker 1: Graffeo is here to explain. Emily great to speak to you.
Speaker 1: Should we start with the basics when we talk actually
Speaker 1: about cryptocurrency. What are most people trading now and how
Speaker 1: are they investing in it?
Speaker 3: So really what we're seeing now is people are either
Speaker 3: buying coins like bitcoin or Ether, and they're doing this
Speaker 3: through brokerage accounts like coinbase that's an app that you
Speaker 3: can use to buy crypto, or the buying exchange traded funds,
Speaker 3: which recently in the US we've seen exchange traded funds
Speaker 3: that track both the direct price of bitcoin and the
Speaker 3: direct price of Ether, and that's really for people who
Speaker 3: don't want to go through all the hoops to buy
Speaker 3: the coins directly.
Speaker 1: So then we're not quite in the early adopters stage.
Speaker 1: Oh wait, is cryptocurrency they fully integrated into institutional finance.
Speaker 3: We're not in the early adopter's phase, but I would
Speaker 3: hesitate to say that we're fully integrated. Crypto still has
Speaker 3: a reputation for being technical and complex, and honestly also
Speaker 3: still a place where there's a lot of scandals and fraud,
Speaker 3: and I think that's why the ETFs are so popular.
Speaker 3: They almost bring a sense of comfort to investors who
Speaker 3: maybe we're too nervous to deal in crypto before. Now
Speaker 3: these ETFs are issued by legacy financial institutions, think Fidelity, Blackrock.
Speaker 3: They have that label associated with them now, and that's
Speaker 3: brought newer investors into the space.
Speaker 1: So then why did the SEC, the US regulator, actually
Speaker 1: allow the ETF in the first space, Because it's also
Speaker 1: quite novel.
Speaker 3: Isn't it. It was a long road to get these
Speaker 3: funds actually trading in the market. Ultimately it came down
Speaker 3: to a legal battle between the Securities Exchange Commission and
Speaker 3: the industry. The SEC was basically in a position where
Speaker 3: they had to move forward and greenlight the funds, and
Speaker 3: we saw in January the bitcoin funds launched and just
Speaker 3: last week the ether funds launched.
Speaker 1: There's also a political angle. The sector has emerged as
Speaker 1: being quite influential potentially in the presidential election. Trump is
Speaker 1: sounding more favorable towards it. Jd Vance is apparently also
Speaker 1: quite in favor. Is bitcoin a proxy for a Trump victory?
Speaker 1: Has there been any action around the presidential race to
Speaker 1: do with cryptocurrency.
Speaker 3: It's hard to expel blain bitcoin's price movements because that's
Speaker 3: one of my jobs here at Bloomberg, and I try
Speaker 3: to do that a lot, and it's very difficult. But
Speaker 3: I will say several weeks ago, when it became clear
Speaker 3: that Trump was leading in the polls, we did see
Speaker 3: a rally in bitcoin, and a lot of crypto industry
Speaker 3: participants typically favor the Trump ticket over some of these
Speaker 3: Democratic lawmakers have sounded a little bit more harsh on crypto,
Speaker 3: But we'll really have to see what happens if Trump
Speaker 3: is elected. If there are any actually crypto favorable policies enacted,
Speaker 3: that's unclear if we'll see that yet.
Speaker 1: A lot of people also thought that crypto might not
Speaker 1: survive the collapse of ftx so that was the third
Speaker 1: largest digital currency exchange in the US. It collapse in
Speaker 1: twenty twenty two. A lot of people might have followed
Speaker 1: Sam Bankman Freed, who is the co founder, and he
Speaker 1: ended up being sentenced to twenty five years in jail.
Speaker 1: Has that been a lot of damn image from that
Speaker 1: or has the industry moved on from that case?
Speaker 3: I would point to the success of the bitcoin and
Speaker 3: ether ETFs as maybe we can call it a glimmer
Speaker 3: of hope that the industry has rebounded somewhat. Like you
Speaker 3: said at the beginning of the show, there's been billions
Speaker 3: of dollars flowing into these only three ETFs have taken
Speaker 3: in more money this year than black crocs, Bitcoin ETF
Speaker 3: It's taken in over seventeen billion dollars in flows. So
Speaker 3: this has been a success story in twenty twenty four,
Speaker 3: these crypto ETFs, despite everything that did happen with the
Speaker 3: collapse of FTX and SBF.
Speaker 1: Do you think the culture has changed.
Speaker 3: I think a lot of that anti establishment, anti Wall
Speaker 3: Street sentiment is still alive. And you know, it's interesting
Speaker 3: ETFs actually have some spirit of that as well. ETFs
Speaker 3: were created it as a vehicle for everyday people to
Speaker 3: make money, so you didn't have to be just you know,
Speaker 3: an important person on Wall Street to see your investments grow.
Speaker 3: And I think there are a lot of parallels between
Speaker 3: that psychology in the ETF world and also in the crypto.
Speaker 1: World, and so trading a ETF does feel then perhaps
Speaker 1: distant from the original idea of decentralized finance. It is
Speaker 1: something that was going to challenge actually the existing kind
Speaker 1: of financial world. How to back as reconcile that.
Speaker 3: Yeah, that's true. The people who came up with bitcoin,
Speaker 3: they were trying to reject the financial system. Despite how
Speaker 3: successful the bitcoin ETFs have been this year, it's nowhere
Speaker 3: near the case that the ETFs are the majority of
Speaker 3: the way that people are trading crypto. It's a big part,
Speaker 3: like we said, billions of dollars of flows now, but
Speaker 3: it's still not the main way that most crypto traders
Speaker 3: are custodying and trading in these assets. Whether or not
Speaker 3: the ETFs become the dominant way that traders are investing
Speaker 3: in crypto really depends on part whether these large financial
Speaker 3: institutions choose to embrace crypto. Think pensions, endowments buying these
Speaker 3: bitcoin and ether ETFs. We've seen a little bit of that,
Speaker 3: but we're nowhere near like we said earlier, like a
Speaker 3: full integration of traditional finance and crypto.
Speaker 1: Emily, thank you. That is our cross asset reporter Emily Graffeo.
Speaker 1: For more explanations like this one from our team of
Speaker 1: two thousand, seven hundred journalists and analysts around the world,
Speaker 1: search for quick take on the Blueberg website or Blueberg
Speaker 1: Business app. I'm Carolyn Hebkere. This is his why. I'll
Speaker 1: be back next week with more. Thanks for listening.