If you follow the cryptospace, undoubtedly you have heard people discussing Bakkt. The platform continues to make headlines and there is a good reason for all this hype. Aside from providing enterprise-level digital asset storage, the platform seeks to be among the first to offer Bitcoin futures.
The Bakkt platform is one of the most highly anticipated projects in the crypto space and its easy to see why. For one, the owner of the New York Stock Exchange, ICE (Intercontinental Exchange Inc.), is the developers of the project. Their experience and vast network helps to navigate the intricate licensing requirements that the project must first meet. Basically, Bakkt has the clout to make their unique products a reality.
As the cryptomarket expands and large scale investment firm enter the space, there is a growing demand for both of these services. Traditional investment firms need to know that their crypto is not only stored safely but insured against theft and other nefarious acts. At its core, the platform provides this security to its users.
Crypto Thefts are on the rise. One recently published study revealing that over $1.7 billion in crypto was stolen in 2018 alone. Furthermore, over $356 million in crypto was stolen this year so far. Consequently, digital asset storage firms such as Bakkt continue to see rising interests in their services.
Despite repeated delays, Bakkt continues to push for Bitcoin futures. Futures are agreements to purchase a said asset for an agreed upon price at a later date. What makes Bitcoin futures so critical to the space is the fact that large scale investment firms can offer the product to their clients without offering Bitcoin directly. These traditional investment firms are eager to enter the space but require more regulations before they can offer crypto-related products to their clients.
Bitcoin Futures Strategy
Bakkt will incorporate a dual futures contract strategy. The first futures contract will be daily settlement Bitcoin futures. This agreement allows investors to interact in a “same-day” market. This product allows day traders to get in on the futures action. The second product that the firm seeks to integrate is monthly Bitcoins futures. Monthly futures allow investors to trade across a forward moving pricing curve.
In order to make its concept a reality, Bakkt incorporates a number of traditional financial tools. These tools are meant to detect and prevent market abuse and manipulation. Both are huge concerns for the current cryptomarket. Also, all contracts will be margined by ICE clear US and a proprietary custodial service will ensure the compliance of all futures throughout their lifecycle.
A Long Road
Bakkt first announced plans to issue Bitcoin futures back in August 2018. The firm submitted its proposal to the US Commodities Futures Trading Commission (CFTC) in December. The firm also submitted an exemption request around the same time. The exemption, if approved, allows Bakkt to custody the Bitcoins used to settle its futures contracts.
Interestingly, the company has sat in legal limbo since that time. Government officials cited a couple of reasons for the delay. These reasons include the government shutdown which started on December 22, 2018, and lasted almost five weeks. Unfortunately, the shutdown left the CFTC backlogged with piles of work and other “high-priority” projects.
To make matters worse, analysts pointed out that the CFTF needs to still release Bakkt's proposal for public review. This step can take over thirty-days and could delay Bakkt's previously announced July release date. Discussing the delays, the director of the CFTF, Amir Zaidi quickly pointed out that the analysis process for a crypto-related future is much different than traditional assets of the same class.
Bakkt that Thing Up
Bakkt appears to have its strategy in line and at this point, you can expect to see Bitcoin futures coming to an exchange near you. The anticipation surrounding this project is admirable. Additionally, Bitcoin traders expect a nice price pump once this product enters the market. For now, the crypto community awaits for Bakkt's final approval.