California is the first U.S. state to formally begin examining how to broadly adapt to cryptocurrency and related technologies, following a path laid out by President Joe Biden in March.

Gov. Gavin Newsom signed an executive order on Wednesday for California agencies to move in tandem with the federal government to craft regulations for digital currencies. It also calls for the state to explore incorporating broader blockchain technologies into state operations.

Ohio was the first to attempt to accept virtual currency for government services in 2018, though the program was soon discontinued. Colorado Gov. Jared Polis says his state will begin accepting cryptocurrency for government services later this year.

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As CNBC reported, Newsom's directive should have California's Business and Economic Development Office working with California's Business, Consumer Services and Housing Agency and the state's financial protection and innovation office.

Newsom's Senior Adviser and Director of the Office of Business and Economic Development in California Dee Dee Myers said, “Of the 800 blockchain businesses in North America, about a quarter of them are in California, dramatically more than any other state,” they said. “We’ve heard from so many that they want to be here, and we want to help them do that responsibly.”

CHICAGO, Ill. — After soaring by 86,000% in just a matter of days, the explosive new cryptocurrency known as "SQUID" crashed to zero this week. It turned out to be a swindle with scammers making off with more than $3.3 million in investor money. Crypto can be risky. Still, it’s a gamble that’s attracting traders of all ages.

If you’ve never heard of cryptocurrency, you’re now in a small minority. New research suggests that only about 4% of American adults surveyed are in the dark about the digital or virtual currency that uses cryptography for security.

“The way you make money on cryptocurrency is by selling it to somebody who thinks it's going to be worth even more in the future than you think it's going to be. It's what's called ‘the greater fool theory’ of investing,” said James Royal, an analyst with Bankrate.com and author of the book "The Zen of Thrift Conversions." “I think hot potato is a good metaphor for thinking about what's going on in cryptocurrency markets right now.”

It’s been more than 10 years since decentralized digital currency Bitcoin was introduced and since then, countless competitors have launched their platforms in the race to create more digital currency.

“Fundamentally, what you're investing in with crypto is not an asset that's backed by something. It's not backed by cash flow. It's not backed by an underlying asset,” said Royal.

Investor confidence varies by generation with millennials leading the way.

According to a recent survey by Bankrate, 49% of millennials are at least somewhat comfortable with investing in crypto assets such as Bitcoin, compared to 37% of Gen X’ers and only 22% of baby boomers.

“We're looking at a period of time where real wages have not grown in decades for a lot of people. And so, I think a lot of people think cryptocurrency is a kind of lottery ticket,” he said.

But Royal says while that lottery ticket could yield substantial returns, it also comes with substantial risk. An estimated one-third of people have been scammed by some type of fake email and imposter website.

“In a fast-growing area like this, where it's not clear exactly who's real and who's fake, it's important to understand that you can get scammed,” he said.

Shady cryptocurrency projects can quickly turn into scams, something proven by the Squid Game-inspired cryptocurrency in the last few weeks.

“It lost it all, literally lost 100% of its value within minutes,” said Royal.

Royal says if you’re getting into digital currencies, be sure to use a reputable exchange or broker like Robinhood or Interactive Brokers. Try to avoid the get-rich-quick mentality of investing and be cautious of allocating too large of a portion of your portfolio to cryptocurrency.

“You're not analyzing assets or cash flow, you're analyzing the psychology of the rest of the market to figure out how you should act," said Royal.

Because in the end, he says virtual currency is driven by optimism and market perception.

Bitcoin rallied to a record Wednesday, topping $66,000 for the first time, amid a wave of excitement about how the financial establishment increasingly accepts the digital currency's rise.

Bitcoin was trading at $66,439, up 5.9%, as of 12:40 p.m. ET, after earlier climbing as high as $66,974.77.

It has roared back after sinking below $30,000 during the summer to top its prior record set in April. That previous all-time high was nearly $64,889, according to CoinDesk.

The surge has come as more businesses, professional investors, and even the government of El Salvador buy into Bitcoin, further broadening its base beyond its initial core of fanatics.

 

The latest converts came into the world of crypto on Tuesday, when the first exchange-traded fund linked to Bitcoin found massive interest from investors.

Shares of the ProShares Bitcoin Strategy ETF changed hands 24.1 million times in a resounding debut.

ProShares, an exchange trading company, listed an ETF that tracks Bitcoin futures on the New York Stock Exchange, the New York Times reported.

“2021 will be remembered for this milestone,” said Michael Sapir, the C.E.O. of ProShares, in an interview with the news outlet.

It was off to another strong start Wednesday, with volume topping 19.6 million within the first three hours of trading.

The ETF doesn’t invest directly in Bitcoin. It instead invests in the futures market tied to Bitcoin, but the industry sees the ETF bringing in a new class of investors.

Someone with an old-school brokerage account can buy the ETF, for example, without opening a trading account for crypto.

Investors are getting more interested in Bitcoin because they always look for assets whose prices move independently of everything else in their portfolios.

One school of thought says Bitcoin can offer investors protection from high inflation, and some fans see it as akin to “digital gold,” though it doesn't have a long track record to back that up.

More high-minded fans say digital assets are simply the future of finance, allowing transactions to sidestep intermediaries and fees with a currency that’s not beholden to any government.

Cryptocurrencies are still very far from winning over everyone, though. Critics point to how they're still not widely used as forms of payment. They also criticize how much energy is used by the cryptosystem, which adds to climate-changing emissions.

The biggest threat, meanwhile, is all the regulatory scrutiny shining on it.

Veronica De La Cruz at Newsy first reported this story.