Bakkt Futures could unlock institutional floodgates, bring in more capital
Bakkt‘s Bitcoin Futures was the most anticipated launch of 2019. However, despite the launch recording a delay of almost a year, it recorded a lukewarm response when it went live on 23 September. However, a recent Longhash report sees no cause for worry.
Bakkt Bitcoin futures were off to a disappointing start after the exchange registered less than $2 million in volume during its first trading session. At press time, the volume was still stagnant around the $2 million mark, whereas other Bitcoin spot markets were facilitating an average of $1 billion in trade.
According to a recent report by Longhash, key crypto-insiders believe that Bakkt’s premier BTC product will soon reap major benefits and change the dynamics of the crypto-market.
Increased Involvement of Financial Institutions
Since its inception, Bitcoin’s market growth and adoption rates have been largely dictated by consumers’ interest, with institutional participation being minimal. A change was noticed recently after reports suggested that for the first six months in 2019, the relative frequency of “institution” attached to Bitcoin headlines grew significantly.
The potential which resides on the institutional side is massive. The introduction of Bakkt has been perceived by many as a gateway for more institutional involvement. Fundstrat’s Tom Lee has in fact suggested that the exchange has the “ability to improve trust with institutions to crypto.”
Bakkt’s credentials speak for themselves. It is supported by the Intercontinental Exchange that operated the New York Stock exchange and has major establishments with BNY Mellon, a powerhouse in global banking. Bakkt could steadily bring more legitimate arguments for the validation of the crypto-industry, while also introducing institutional level security to the ecosystem.
Sasha Fleyshman, a trader at Arca crypto-investment firm, stated,
“Bakkt hasn’t necessarily reinvented the wheel. CME Bitcoin futures already offer exposure to Bitcoin but launching an institutional-grade custody solution for physical Bitcoin is a huge value add. This could make a huge difference for them in the long run.”
Another huge advantage listed out in the report was the physically-settled nature of its Futures. Bakkt was commissioned by the CFTC and the New York state to officiate proper custodial services for Bitcoin.
The advantage was explained by PlanB, a crypto-commentator, who commented on how it impacted the scarcity index of Bitcoin. He said,
“You could theoretically sell more than 21 million Bitcoin [through the CME’s futures], even if there isn’t 21 million Bitcoin [on chain]. … You would need a lot of cash, but you could do it, especially with the backdrop of government having access to printing presses.”
Keeping his opinion in mind, it is clear that Bitcoin’s scarcity idea could be synthetically exposed and it broadens the pathway for more manipulation and unaccounted volatility.
On the contrary, Bakkt’s Futures would directly deliver Bitcoin to its users and would be legally verified by its contracts. This would reduce the bidding for Bitcoin which contract holders were not allowed to hold, as the coins were not technically represented on the blockchain in CME cash-settled BTC futures.
Bakkt’s future has the ability to solve two major adoption hurdles. The inability of retailers to accept BTC and receive fiat, and the complexity that arrives with consumers storing their coin on their mobile devices.
Bakkt’s slow start has stalled its progress for now, but major indicators and analysts believe that it could still be a game-changer in the long run.