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