MARY LOUISE KELLY, HOST:
Bitcoin is up 70% from what it was just a couple of months ago. The cryptocurrency is now sitting at a record $72,000. Our colleagues at The Indicator From Planet Money, Adrian Ma and Wailin Wong, checked in with a bitcoin believer and a skeptic and asked, what's going on?
ADRIAN MA, BYLINE: The spark that lit this latest bitcoin rally can really be summed up in three letters - E, T and F.
WAILIN WONG, BYLINE: ETFs, also known as exchange traded funds, 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 and silver. Now, two months ago, these bitcoin ETFs made their debut on the U.S. stock market.
ANDY BAEHR: It was also a season finale of years of growth in the industry with some epic storylines.
MA: Andy Baehr is with CoinDesk Indices, which is a company that provides data and research on the crypto market. He spoke with us right before those ETFs came out and says, since then, the inflow from investors has been massive.
WONG: And Andy says this has caused demand for bitcoin to way outrun supply.
BAEHR: A really neat way to think about this is not in dollars so much, but in bitcoin. Every day, bitcoin miners mine 900 bitcoins.
WONG: Bitcoin mining, by the way, is how new bitcoins are created. It's a process that involves using computers and really tough math problems. And every time a computer solves one of these really hard problems, a little bitcoin is produced.
MA: By design, bitcoin source code actually limits the amount of bitcoin that can be mined in a given period of time. As Andy said, it's currently around 900 bitcoins a day. But he says since bitcoin ETFs were approved, he estimates the amount of bitcoin being sucked into these funds is at least 2,000 a day.
BAEHR: So those extra bitcoin demand means that people are having to buy bitcoin from existing bitcoin holders.
WONG: That's a big reason why the price of bitcoin has increased almost 70% since January, but Andy says there's another. Bitcoin has built-in scarcity. For one thing, the program that undergirds bitcoin has a cap of 21 million. We're at about 19 million now, and we're not expected to hit 21 million for at least a century.
MA: And another thing about Bitcoin is this thing that crypto heads call halving - as in to cut in half. So every four years, the amount of bitcoin that can be mined from solving one of those tough computer problems is reduced by half. This has actually already happened a few times, and the next one is scheduled for April.
WONG: Now, it's important to say here that a lot of financial experts are pretty skeptical of this idea that bitcoin's supposed scarcity gives it value as an investment. These people include Henry Hu. He teaches corporate and securities law at the University of Texas.
HENRY HU: They say, hey, it's a modern form of gold. But the analogy is really, really stretched.
MA: Yeah. Like bitcoin, gold is scarce. But unlike bitcoin, gold is also used for stuff. Like, people make jewelry out of it. Companies put gold in electronics and even central banks.
WONG: And yet, the price of bitcoin continues to climb. So we asked Henry - does he think this is a bubble?
HU: I don't know because normally, when you talk about bubbles, one of the things that you do is you try to gauge the trading price against some notion of intrinsic value. But for the life of me, I can't figure out what the intrinsic value of bitcoin is.
MA: Henry says the normal way you think of intrinsic value when it comes to things like stocks is, you know, do these stocks pay off for investors? If a company has cash flow, that's intrinsic value.
HU: With bitcoin, you don't have cash flow. You're only basically investing, in a sense, what you think other people will pay for this thing that generates no cash flow. How do you guess human psychology like that?
WONG: So maybe this bitcoin surge was sparked by the letters ETF, but it's also being fed by a different set of letters - F-O-M-O.
MA: And that FOMO is not limited to bitcoin, right? Other cryptocurrencies are actually rising amid all this buzz right now. And get this - even the London Stock Exchange seems to be jumping on the crypto bandwagon. Earlier this week, it said it will soon accept applications to list new securities based on bitcoin and another cryptocurrency - ether.
WONG: Wailin Wong.
MA: Adrian Ma, NPR News.
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