MICHEL MARTIN, HOST:
It was expected to be a pivotal moment in bitcoin's short history. For the first time, regular investors could put money into bitcoin through a popular kind of investment fund. But as NPR's David Gura reports, the reality has not lived up to the hype, at least not yet.
DAVID GURA, BYLINE: Investing in crypto has always been clunky and complicated, but a decision by the Securities and Exchange Commission to approve about a dozen new investment funds - ETFs, in Wall Street speak - that track the price of bitcoin promised to change that and to make it more of a mainstream investment. It was also expected to spark a new boom in bitcoin.
(SOUNDBITE OF MONTAGE)
UNIDENTIFIED NEWS ANCHOR #1: Crypto investors waiting with bated breath for approval of a bitcoin ETF.
UNIDENTIFIED NEWS ANCHOR #2: This is a watershed moment. No question about it.
UNIDENTIFIED NEWS ANCHOR #3: The bitcoin ETF could send prices even more to the moon.
GURA: For a decade, regulators were resistant, but a federal court decision forced their hand. Last month, the SEC gave the green light to 11 spot bitcoin ETFs, several of which are backed by some of the world's largest money managers. Lee Reiners is a fellow at the Duke Financial Economics Center.
LEE REINERS: You basically are creating an interstate freeway that's connecting the crypto economy with the traditional financial system.
GURA: ETFs are a $7 trillion industry. The funds track baskets of stocks and commodities and indices like the S&P 500. But the response to bitcoin ETFs has not been as strong as forecast. And Reiners says that's due in part to all the negative publicity surrounding crypto in the months leading up to the debut. The cryptocurrency exchange FTX collapsed spectacularly, and last year, its founder and CEO, Sam Bankman-Fried, was convicted of seven criminal counts. He could spend the rest of his life in prison. Well, since these ETFs started trading last month, bitcoin's price has fallen by about 10%. Craig Erlam is a senior analyst at Oanda, and he says crypto investors may have gotten ahead of themselves.
CRAIG ERLAM: Two years ago, people were talking about could bitcoin reach $250,000? When is it going to reach $1 million? There is always overoptimism in this area.
GURA: Bitcoin thrives on hype because there's no real use case for the cryptocurrency, according to Duke University's Lee Reiners, who says these new funds haven't changed that.
REINERS: This is an asset that has traded entirely on sentiment.
GURA: Which is a big reason regulators have been so wary. When the SEC finally did approve these new funds, SEC Chair Gary Gensler emphasized he and his colleagues were not endorsing bitcoin itself. Reiners, who calls himself a crypto skeptic, concedes the creation of bitcoin ETFs was probably the biggest moment in the history of bitcoin other than bitcoin's creation, and it's still too early to pass judgment on it.
REINERS: Crypto and bitcoin in particular is as much of an ideology as it is an asset class. And the thing about ideologies is that they can last a long time. So who knows what's going to happen with crypto, but it's not going away.
GURA: Reiners does wonder how long the market can sustain this many bitcoin ETFs and if this will lead to bitcoin becoming more common in investment portfolios.
David Gura, NPR News, New York. 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.
