Bakkt, the long-awaited cryptocurrency trading platform by the Intercontinental Exchange (ICE) announced Friday that it (finally) obtained the regulatory approval to go ahead with the launch of the company’s institutional-grade custody solution and physically-delivered Bitcoin Futures contracts.
The buzz has been quite loud across the cryptocurrency space ever since as the company prepares to roll out these flagship products on Sep 23 officially.
Expectedly, the news has generally been perceived pretty bullish by most analysts and commentators, with some going as far as calling it the best thing yet for Bitcoin and its brethren.
Is it really that bullish, though?
Let’s find out why Bakkt’s entry into the scene has instilled such enthusiasm among industry proponents.
The Keyword is “Physically Delivered”
The effect of Bakkt’s announcement was felt almost immediately as BTC jumped $300 within the hour of the news going viral in the cryptocurrency side of Twitter. Although the spike did subside afterward, it was only a matter of time until the question was raised as to why Bakkt’s entry into the scene was generating so much buzz. After all, it’s not the first company to be offering Bitcoin Futures contracts.
Similar offerings are already on the menu from rivals such as CME Group, Cboe Futures Exchange, among others.
can someone explain how bakkt is bullish for bitcoin? (serious question, not sure myself)
— Crypto Loomdart (@loomdart) August 16, 2019
Well, it turns out, there’s one key difference: Unlike all existing Bitcoin Futures offerings, the one from Bakkt is of the “physically delivered” variety.
For those out of the loop, futures contracts come in two categories: cash-settled and physically delivered contracts. Cash settled futures contracts are not deliverable and involve the transfer of associated cash positions (debit/credit) to the signatories once the contract expires.
With a physical delivery, however, the underlying asset (BTC in this context) is physically delivered to the buyer upon the expiry of the contract.
Bakkt’s Big Push For Bitcoin
In other words, any Bitcoin futures contract offered by Bakkt will require the actual purchase of Bitcoin and not its fiat equivalent. This is the critical factor that has led many analysts to believe that Bakkt’s offering will play a catalyst to push the demand for Bitcoin to new highs.
Assuming they’re right, that’s going to be huge for the Bitcoin community worldwide — more so now than ever that institutional investment in the cryptocurrency space is already skyrocketing, as pointed out by Coinbase CEO Brian Armstrong yesterday.
Whether institutions were going to adopt crypto or not was an open question about 12 months ago. I think it's safe to say we now know the answer. We're seeing $200-400M a week in new crypto deposits come in from institutional customers.
— Brian Armstrong (@brian_armstrong) August 16, 2019
According to Joseph Young, a financial analyst and a familiar name in the broader community, Bakkt’s forthcoming launch has already reversed the likelihood of a short term bear trend.
Bakkt launch announcement in September almost instantly reverses the possibility of a short term bear trend of bitcoin after dipping below $9,500 on August 15.
Bitcoin is up nearly $1,000 since then within 48 hours.
— Joseph Young (@iamjosephyoung) August 16, 2019
A quick look at cryptocurrency Twitter is enough to get a sense of the prevailing market sentiment, which seems overwhelmingly positive.
Many of us said that this bull run was different, because it happened without retail interest or fomo. Price rose steadily from 3200 to 14K without media hype. Our hypothesis was that it was a result of institutional investment. I think that hypothesis was correct.
— The Wolf Of All Streets (@scottmelker) August 16, 2019
BREAKING: Bakkt with launch Sept. 23.
The hype is bakkt with substance.
Unlike other futures exchanges, this is settled in bitcoin. Hard, actual bitcoin is paid out, not fiat equivalent to the price of bitcoin.
The result is better price discovery and liquidity for bitcoin.
— Rhythm (@Rhythmtrader) August 16, 2019
Also, note that Bakkt is a subsidiary of the Intercontinental Exchange, one of the most reputed financial institutions in the world with 12 regulated exchanges and marketplaces to its name. So, naturally, its brand value will also attract those investors who were otherwise hesitant to invest in cryptocurrencies due to the lack of regulation.
On top of that, Bakkt will also give investors in countries with a ban on cryptocurrency trading an additional avenue to get cozy with the asset class.
What about you, though? Are you optimistic that Bakkt’s forthcoming offerings will ignite another Bitcoin price rally? Share your thoughts in the comments below.
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