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The crypto comeback

ADRIAN MA, HOST:

Could cryptocurrency make a comeback in 2024? This is what some crypto enthusiasts are predicting. And maybe this statement makes you go, what? Didn't the cryptocurrency market, just a year ago or so, experience a massive crash? And, oh, didn't this past year also see some major crypto companies like the trading platform FTX go bankrupt? Oh, and also, wasn't the founder of that company, Sam Bankman-Fried, convicted of fraud? Well, yes.

ANDY BAEHR: Let's face it, the digital asset industry had a sink full of dirty dishes, mostly in the form of bad behavior by some individuals and firms.

MA: Andy Baehr is with CoinDesk Indices, a company that gathers data and research on the cryptocurrency market. He is actually optimistic about the future of crypto thanks to a development involving the OG cryptocurrency, Bitcoin. So here's what's going on. In January, it's expected that the Securities and Exchange Commission, the agency that regulates stock trading in the U.S., it's expected they're going to allow investors to start trading a new kind of financial asset called a spot bitcoin ETF - exchange traded fund. Andy Baehr describes it like this.

BAEHR: ETFs are one of the most important financial products available to any kind of investor. They make it easy for individuals, advisers and institutions to buy and trade primarily baskets of securities like the S&P 500, but also hard-to-store assets like gold or silver.

MA: Yeah. I mean, like, unless you were Scrooge McDuck, buying gold bullion? Kind of tricky for most people. But buying a gold ETF - relatively simple because ETFs trade on exchanges just like regular stocks. Now, the idea with the spot bitcoin ETF is similar - to make it easier for people to invest in bitcoin. And for bitcoin believers like Andy Baehr, it's a major signal that this coin is going to become more mainstream, and this has caused the price of bitcoin to surge in recent weeks, up to around $40,000.

Now, for context, when bitcoin first came on the scene around a decade and a half ago, the only way to get it was you had to be pretty tech savvy. But with this bitcoin ETF, even old-guard financial firms like Fidelity, BlackRock and Franklin Templeton could be offering bitcoin ETFs to their clients.

BAEHR: We should look at this as a continuum of bitcoin, moving from super pioneer adopters to early adopters to early mass adoption. And yes, I think the catalyst of the bitcoin ETF being approved is sort of a major turning point.

MA: A turning point not just for bitcoin but, Baehr believes, a turning point for cryptocurrencies more broadly to become part of more people's investment portfolios. Now, other financial experts are more skeptical.

HENRY HU: Whenever you have a shiny new object in the investment universe, very often, people think of them as magic beans. And time and again, people have gotten burned.

MA: Henry Hu teaches corporate and securities law at the University of Texas in Austin. He says those considering these bitcoin ETFs should be cautious.

HU: It's very hard to come up with the idea of what the intrinsic value of bitcoin is. So what you're left with is you're basically trying to guess what other people are willing to pay for bitcoin. For the ordinary investor, this is a very hazardous game.

MA: That's a lesson a lot of bitcoin investors learned the hard way during the recent crypto crash. At its peak in late 2021, bitcoin was worth around $65,000 per token. Then, in a matter of months, its price dropped to around $15,000, wiping out about three-quarters of its value. Hu says this is worth keeping in mind even as we see bitcoin's price rebound towards those pandemic-era highs. He says if the price can rise, it can also collapse. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Adrian Ma
Adrian Ma covers work, money and other "business-ish" for NPR's daily economics podcast The Indicator from Planet Money.