Cryptocurrency Contracts Will Pay in Bitcoin
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at the Wall Street Journal in New York. Pretty soon, investors in cryptocurrencies will be able to purchase contracts, which will, for the first time, allow them to be potentially paid in Bitcoin. We'll explain in a moment. First, these money and market stories you should know. The stock market's steep downward slide over the past several weeks might send shivers down the backs of investors, but the Wall Street Journal's Streetwise column says it really may not be that bad. Columnist James McIntosh looks at history and says the loss from the S&P's peak this year to year end, which is about 6%, doesn't stand out as especially bad from other sharp pullbacks, and that's because we're currently at the lowest point in the year, which is unusual as the festive season gets into swing.
In this time of year, trucks from UPS, FedEx, and other delivery services are clogging streets and driveways, but it's not just holiday gifts in the back of the truck. The Wall Street Journal Logistics Desk reports of the 800 million packages UPS expects to deliver this holiday season, more than 24 million in December alone will be shipments heading back to the sender.
What new type of Bitcoin contract will pay investors in actual bitcoin instead of cash?
What's more, B-Stock Solutions, which runs online liquidation sites for major retailers, says about a third of this season's $123 billion in estimated online sales are expected to be returned. See the full story on WSJ.com or the WSJ app.
Up to now, cryptocurrency investors could buy contracts to bet on the price of Bitcoin, for example, and they would be paid out in cash.
How does Intercontinental Exchange’s physically settled future differ from cash-settled Bitcoin futures?
Well, now, for the first time, contracts will be available that will pay investors in Bitcoin. And Wall Street Journal reporter Gabriel Rubin is with us on the line with details. So, Gabriel, these contracts are being launched by Intercontinental Exchange, which owns the New York Stock Exchange, and they'll add a dose of legitimacy to the cryptocurrency markets.
Ice or the Intercontinental Exchange is not the first major institutional player to get into these markets, but they are the first to offer what's known as a physically settled future, which contrasts to a couple of the other Bitcoin futures on the market, which would pay you out in cash. By contrast, this contract pays you out in Bitcoin when the contract reaches its settlement point.
Now, these contracts aren't intended for everybody.
Who are the intended users of these Bitcoin-settled contracts and why aren’t they for everyone?
They're actually aimed at institutional traders who've actually stayed out of the cryptocurrency market.
Yeah, a lot of major banks and hedge funds and asset managers that do trading in all sorts of markets have really taken a wait-and-see approach on cryptocurrency. And I think that the past year, given the price fluctuations...
How have recent price swings and prior futures offerings affected institutional interest in Bitcoin?
And accusations of manipulation and hacks have really shown that that approach was the right approach in many cases. So an effort by a respected name like the owner of the New York Stock Exchange really sort of allows them to reconsider whether they can get into this market in a clear, transparent, and regulated way.
You know, you mentioned these fluctuations in these contracts that will pay out in Bitcoin come at a much quieter period for the cryptocurrency market as compared to a year ago. Bitcoin has dropped 80% in value.
Which major companies are backing the new platform and what retail use cases do they envision?
There are a lot of investigations going on about the volatility in this market.
Yeah, it's been a really interesting year for crypto, to say the least. Just about a year ago, during the month of December, we had a crazy run up in the price that saw Bitcoin top out around $20,000. It's, as you mentioned, trading at 80% below that at this point. And most people view that as sort of a bubble that has popped. But also it's the result of the futures contracts that launched on the CME and SIBO exchanges last year. which really allowed sort of people to bet against Bitcoin in a way that they couldn't prior to December of last year. So it really has brought, I wouldn't say stability, but perhaps a bit more realism into markets that were really promising the moon and perhaps not delivering it.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:05–1:10
2
What new type of Bitcoin contract will pay investors in actual bitcoin instead of cash?
1:10–1:44
3
How does Intercontinental Exchange’s physically settled future differ from cash-settled Bitcoin futures?
1:44–2:25
4
Who are the intended users of these Bitcoin-settled contracts and why aren’t they for everyone?
2:25–2:46
5
How have recent price swings and prior futures offerings affected institutional interest in Bitcoin?
2:46–3:21
6
Which major companies are backing the new platform and what retail use cases do they envision?
3:21–5:16
Speakers
2 identifiedMore from WSJ Your Money Briefing
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