Soon there's going to be a new and easier way to buy into cryptocurrency
A MARTÍNEZ, HOST:
Soon, there's going to be a new and easier way to buy into cryptocurrency. The Securities and Exchange Commission greenlit an investment vehicle for listing and trading something called Bitcoin ETFs. Our colleagues over at The Indicator From Planet Money, Adrian Ma and Wailin Wong, help answer the question, what is an ETF?
ADRIAN MA, BYLINE: Andy Baehr is with CoinDesk Indices, a company that gathers data and research on the cryptocurrency market.
ANDY BAEHR: I oversee product and distribution.
MA: And he says despite the lows of the past couple of years, he's confident that with some better regulation, more education, crypto is going to continue to rally.
WAILIN WONG, BYLINE: And a major catalyst for this rebound is that the U.S. Securities and Exchange Commission is expected to allow investors to trade a new kind of financial product, called a spot Bitcoin ETF.
MA: Spot Bitcoin ETF I know is quite the dry jargon sandwich. So let's take that apart and put some sauce on it, shall we? ETF stands for exchange-traded fund. Andy describes it like this.
BAEHR: 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.
WONG: Yeah. Let's say you do want to invest in gold. You could buy gold bars, but unless you're Scrooge McDuck, that might be kind of tricky. You got to figure out where to get it and where to store it. Alternatively, you could buy shares of a gold ETF, which is relatively simple because ETFs trade on exchanges just like regular stocks.
MA: So ETFs make it easier for investors to put their money in different things. Andy says it's a sign Bitcoin is becoming more mainstream.
BAEHR: I think the catalyst of the Bitcoin ETF being approved is sort of a major turning point.
WONG: Andy says what makes the Bitcoin ETF a turning point is who would offer them - not just companies like Grayscale, which specialize in crypto, but also old-guard marquee financial firms like Fidelity, BlackRock and Franklin Templeton.
BAEHR: So we think that this just continues to broaden the population of people who will be able to have a small allocation.
MA: Some financial experts, though, are skeptical - like Henry Hu. Henry teaches corporate and securities law at the University of Texas in Austin. He says just because a financial product is government-regulated does not mean it's without risk.
HENRY HU: Whenever you have a shiny new object in the investment universe, very often, people think of them as magic beans. And, you know, time and again, people have gotten burned.
MA: What do you make of the fact that you've got a company like Fidelity or BlackRock saying like, yeah, let's make this spot Bitcoin ETF? Do you feel like that kind of backs up the story some people are seeing in this?
HU: Toy stores used to sell Pet Rocks. It doesn't necessarily mean they think it's a good idea. It's very hard to come up with the idea of what the intrinsic value of Bitcoin is.
WONG: That's a lesson that a lot of Bitcoin investors learned the hard way from the recent crypto crash. At its peak in 2021, the price of a Bitcoin was about $65,000. Then, in a matter of months, that fell by about 75%, wiping out hundreds of billions of dollars in value.
MA: Yeah. And Henry says that is worth keeping in mind, even as we see Bitcoin's price rebound towards those pandemic-era highs. If the price can shoot up, it can also collapse.
WONG: Wailin Wong.
MA: Adrian Ma, NPR News.
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