Bitcoin: NYSE Owner Launches New Futures Market
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What is the main topic discussed in this episode?
Here's your money briefing. I'm J.R. Whelan at The Wall Street Journal in New York. The owner of the New York Stock Exchange launched a Bitcoin futures market this week. And in a moment, we'll explain how that could affect the price of the cyber currency and whether more merchants are likely to accept it as payment. First, some money and market news you should know. Americans are saving more, but that may not be great for the economy. The U.S. personal saving rate, which is calculated by the after-tax income that consumers don't spend, has been drifting higher over the past decade instead of falling as the economy grows stronger and consumers become more confident.
What is the NYSE owner’s new Bitcoin futures market and why does it matter?
It was under 4% prior to the recession in 2007 and hit about 8% through the first half of this year. Economists say many Americans may have put away their 2017 tax cuts, but they also say the recession made consumers more cautious. And there may be a widening gap between the rich, who are able to save a lot, and the poor, who cannot. And economists say if savings outstrip investments for a long time, that could keep interest rates and economic growth in check. China is on the hunt for meat. A swine flu outbreak has wiped out a third of China's pig herds, and now China is importing more meat and driving up prices and exporting regions like Brazil, Australia, and Europe. American shoppers aren't seeing spikes yet, but the projected December hog prices, which could affect pork, are up 4.5%.
Demand is so high that Chinese officials have said the country could exempt U.S. pork and some other agricultural goods from punitive tariffs. Executives from U.S. meat companies Tyson Foods, Smithfield Foods, and Sanderson Farms say they expect a benefit from higher prices.
The cryptocurrency Bitcoin has hit a wall when it comes to being accepted by merchants, and that's because of its wild price swings and a lack of transparency. CME Group launched a Bitcoin futures market several years ago to ease those fears, and this week the owner of the New York Stock Exchange, Intercontinental Exchange, launched its own. Now, why is that important to Bitcoin investors?
How could higher U.S. personal saving rates affect the economy and markets?
Let's ask Wall Street Journal reporter Alexander Osipovich. So, Alex, this Bitcoin futures market from Intercontinental Exchange, it's been in the works for a while. What was the holdup?
Intercontinental Exchange, which is known as ICE for short, had a very particular design in mind for this contract, which could potentially be really, really good in terms of having it be effective, but also made it more complicated to launch. If you are a trader holding these contracts and you hold them until they expire, then you might get actual digital units of Bitcoin and you have to be ready to handle that. And ICE had a lot of trouble getting approval from this from the regulator, the CFTC, because of various issues around that process, which is called physical delivery. Physical delivery, incidentally, is used in a lot of futures contracts, live cattle futures, cocoa futures contracts. aluminum futures, but it hasn't yet been applied to Bitcoin per se.
There is another futures contract out there on Bitcoin at CME Group, which is the other big futures exchange in the US, and it's not physically delivered. It is what they call cash settled. So if you hold the CME contract until it expires, you may get dollars or you might have to pay dollars depending on whether your bet paid off or not.
And a futures market, which is what this is, allows investors to bet on the rise and fall of the price of things like corn and soybeans and oil. Are investors able to bet on Bitcoin's price up and downs?
Yes. That is kind of the point of the futures market. Essentially, futures allow some people to manage their risks by hedging and sort of protecting themselves against unfavorable price swings. For instance... If you're an oil producer, you might use futures to hedge against the price of oil falling, while other people use the futures markets to speculate and place bets.
But let's just back up for a moment.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:05–0:41
2
What is the NYSE owner’s new Bitcoin futures market and why does it matter?
0:41–2:17
3
How could higher U.S. personal saving rates affect the economy and markets?
2:17–6:09
4
Why is China’s swine flu outbreak driving global meat prices and trade?
6:09–7:31
Speakers
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