Cryptocurrency Contracts Will Pay in Bitcoin

Summary

WSJ Your Money Briefing

Episode: Cryptocurrency Contracts Will Pay in Bitcoin
Date: December 21, 2018
Host: JR Whalen, The Wall Street Journal
Guest: Gabriel Rubin, WSJ Reporter

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Episode Overview

This episode delves into a significant new development in the world of cryptocurrency: the launch of bitcoin futures contracts that will be settled in actual bitcoin, rather than cash. Hosted by JR Whalen, the episode features expert insights from WSJ reporter Gabriel Rubin, highlighting how the move by Intercontinental Exchange (ICE)—the owner of the New York Stock Exchange—could lend legitimacy and transparency to the cryptocurrency market, and why major companies like Starbucks and Microsoft are investing in such projects.

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Key Discussion Points & Insights

1. The Introduction of Physically Settled Bitcoin Futures

[02:33 - 02:53]

• ICE is launching “physically settled” bitcoin futures—meaning contracts are paid out in bitcoin, not cash.

• Previous bitcoin futures (like those on CME and CBOE) paid out in cash only.

• This new contract structure could mark a turning point for the legitimacy and acceptance of cryptocurrency in mainstream finance.

  Quote:

  • “ICE, or the Intercontinental Exchange... are the first to offer what’s known as a physically settled future... this contract pays you out in bitcoin when the contract reaches its settlement point.”
    — Gabriel Rubin [02:33]

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2. Target Audience: Institutional Investors

[02:53 - 03:40]

• These contracts are designed for institutional investors—major banks, hedge funds, and asset managers.

• Institutions have largely stayed out of crypto due to concerns about volatility, market manipulation, and hacks.

• The involvement of a respected firm like ICE may help institutional investors feel more comfortable entering the space.

  Quote:

  • “Major banks... hedge funds and asset managers... have really taken a wait and see approach on cryptocurrency. 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...”
    — Gabriel Rubin [03:01]

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3. Context: A Volatile Year for Bitcoin

[03:40 - 04:46]

• The launch of these new contracts comes after a dramatic drop in bitcoin’s value—down 80% from its peak in December 2017.

• The 2017 “bubble” saw bitcoin prices soar to about $20,000 before crashing.

• The launch of cash-settled futures last year (on CME and CBOE) allowed investors to bet against bitcoin, which contributed to more realism in the market.

  Quote:

  • “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.”
    — Gabriel Rubin [03:56]

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4. Corporate Backing and the Future of Bitcoin in Retail

[04:46 - 05:35]

• Major companies—including Starbucks, Microsoft, and Boston Consulting Group—are investors in this new ICE-backed exchange.

• The broader ambition is to prepare the groundwork for cryptocurrencies like bitcoin to be used for everyday retail transactions.

• Starbucks, for instance, is exploring the ability to eventually accept bitcoin for purchases.

  Quote:

  • “Starbucks... really wants to be able to accept Bitcoin. When you go to buy a latte, will that happen immediately? No. But... they see Bitcoin sticking around for the long term and they see possible retail uses for it also.”
    — Gabriel Rubin [04:53]

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Memorable Moments

• Legitimacy through institutional involvement: The presence of ICE, and backing from recognized companies, could be a game changer.
• Commentary on volatility: The episode provides a concise history of recent wild swings in cryptocurrency and how futures contracts have introduced more “realism.”
• Retail optimism: The discussion about Starbucks’s interest personalizes the longer-term vision for bitcoin use in everyday life.

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Important Segment Timestamps

| Timestamp | Segment Description | |--------------|-----------------------------------------------------| | 02:33 | Introduction of physically settled bitcoin futures | | 03:01 | Discussion of institutional investor interest | | 03:56 | Bitcoin’s recent price collapse and market context | | 04:53 | Corporate backers and retail ambitions for bitcoin |

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Episode Takeaways

• New “physically settled” bitcoin contracts from ICE are targeting institutional investors and may bring transparency to a turbulent market.
• Major corporations see long-term potential for bitcoin in retail, not just finance.
• Recent developments suggest a maturing of the crypto market, along with persistent caution due to past volatility.

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For more personal finance news and analysis, visit WSJ.com.

Transcript

[A]

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[B]

With youh Money Briefing, I'm JR 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 in market stories. You should know the stock market steep downward slide over the past several weeks might send shivers down down the backs of investors. But the Wall Street Journal 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 TR, 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'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. 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 Exchan, which owns the New York Stock Exchange, and they'll add a dose of legitimacy to the cryptocurrency markets.

[C]

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.

[B]

Now, these contracts aren't intended for everybody. They're actually aimed at institutional traders who've actually stayed out of the cryptocurrency market.

[C]

Yeah, a lot of major banks that do, a lot of 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 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 New York, 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.

[B]

You know, you mentioned these fluctuations and 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 8, 80% in value. There are a lot of investigations going on about the volatility in this market.

[C]

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 CBOE 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.

[B]

And a boost to these contracts is that they have the backing of some large companies that want cryptocurrency to be a bigger part of their business.

[C]

Yeah, that's right. So Starbucks and Microsoft as well as Boston Consulting Group are investors on this project. And the longer term goal here is to really make cryptocurrencies, and especially bitcoin, just as the largest cryptocurrency into something that can be used in retail situations. Starbucks, without getting ahead of itself, really wants to be able to accept Bitcoin. You know, when you go to buy a latte, will that happen immediately? No. But the fact that they're engaging with a platform that seeks to make Bitcoin more regulated and transparent shows that they see Bitcoin sticking around for the long term and they see possible retail uses for it also.

[B]

All right, that is Wall Street Journal reporter Gabriel Rubin joining us from our Washington bureau. Gabriel, thanks for being with us.

[C]

Thank you.

[B]

And that's your money briefing. HR I'm JR Whalen in New York for the Wall Street Journal.

[A]

This podcast is brought to you by reliaQuest. Cybercriminals are constantly attacking. They want your data. They want your identity. They want your innovation. ReliaQuest fortifies your business with agentic defense AI that detects, contains, and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. ReliaQuest agentic defense for the enterprise. Learn more at reliaquest. Com. That's R E L I A Q U E S T Com.