Bitcoin’s recent collapse partly due to ‘over-enthusiasm’ about Bakkt
The launch of Bakkt’s Bitcoin Futures was one of the highly anticipated events of 2019.
After a long delay, the ICE-backed institution’s Futures product went live on 23 September. However, it was off to a slow start. Bakkt’s trading volume was around $2 million on a day-to-day basis, a figure which was low when compared to other spot markets where the recorded volume was around $1 billion each day.
According to Tom Lee, Chief Strategist at Fundstrat, Bakkt’s launch has created a unique situation.
In a recent interview, Lee claimed that Bakkt’s functionality involving one day physical delivery of Bitcoin is interesting as institutions will be more willing to acquire Bitcoin outright. However, Lee suggested that the slow start of Bakkt was probably due to the fact that it was easier for institutions to trade Bitcoin through CME as it also offered the option to take physically delivered Bitcoins of contracts that are cash-settled. However, Lee added,
“I think Bakkt is really reflecting the true institutional volume of funds that want to accumulate Bitcoin.”
Speaking about the recent collapse of Bitcoin on 24 September, Lee claimed that Bakkt’s launch may have played a minor role, but on a broader perspective. He clarified that Fundstrat had calculated Bitcoin’s enthusiasm via a measure called the Bitcoin misery index. He said,
“It measures what we believe is the perception of a holder. Bitcoin reached a level that you’ve only seen a handful of times in the last 10 years, and it means buyers were overly optimistic. Uh, so part and part of that sort of overenthusiasm was probably due to Bakkt.”
The aforementioned statement by Tom Lee reverberated across the market yesterday after Bitcoin’s price recorded another major fall. A depreciation of over 7 percent in an hour saw the world’s largest crypto-asset fall below the $7500 range. Over the same period of time, Bakkt reportedly traded over $4.5million, which was its highest trading volume since its launch.
At the moment however, it is too early to judge the success of Bakkt as eventually, it should gain significant attention from much of the masses, Lee added.