Bakkt is preparing for September 23, the day that institutional investors can conclude contracts with real bitcoin future contracts. That is also an exciting day for us crypto enthusiasts, months (years?) Have been looking forward to this. The most important question is what influence Bakkt will have on course and regulation.
In this article we look at the current state of affairs at Bakkt.
What is Bakkt?
Bakkt is a subsidiary of the Intercontinental Exchange (ICE) and has now finally received approval from the US Commodity Futures Trading Commission for physically handled bitcoin futures.
Many difficult concepts in one long sentence, so we will visit them. What you need to know about ICE is that they have a big finger in the entire financial world. From the US to Singapore and even in the Netherlands. ICE is also the umbrella organization of the famous New York Stock Exchange. Because of the size and reputation of ICE, it seemed a matter of time before the correct permits for Bakkt would be arranged.
ICE has received approval to set up Bakkt Trust Company. Real bitcoins may be stored under this name, not only for Bakkt itself but also for investors and institutional clients. Insurance is also offered for when something goes wrong with the coins.
Keep bitcoin safe
This service and the additional certainty make it possible that physically processed bitcoin futures can be offered. First about futures: you speculate on the future value of bitcoin. Do you expect the rate to go down? Then you take a contract on which you go short. Conversely, you can also take a long position.
This in itself is not very special, other parties also offer that. The big difference is that at Bakkt the contracts are handled in bitcoin. Speculators must therefore enter bitcoin (instead of dollars) to take a position.
The Bakkt Warehouse opens today
It is regulated by the New York State Department of Financial Services (NYDFS) as a Limited Purpose Trust Company, providing customers with a Qualified Custodian or bitcoin
– Bakkt (@Bakkt) September 6, 2019
And Bakkt is unique in that, because of their service Bakkt Warehouse, they can safely store bitcoins. Incidentally, this safe has been open since 6 September. Customers can deposit bitcoin to speculate from the 23rd.
Details about contract settlement
Trading hours are between 8:00 PM and 6:00 PM the next day (time zone: US East Coast) with a daily checkout window between 4:58 PM and 5:00 PM. The contract size is equal to 1 bitcoin with a minimum price fluctuation of $ 2.50 per bitcoin (or per contract) and block transactions are executed at 1 dollar cent.
Stability and better rules
ICE hopes that Bakkt can quickly capture a large market share in the bitcoin trading volume. Bakkt also wants to play a leading role in what is called price discovery. By this, Bakkt means that their service becomes important in the pricing of bitcoin. The hope is also that Bakkt can ensure more price stability. That will be quite a mess with the current economic and geopolitical environment.
The expectation has also been expressed that Bakkt will force regulators to develop clearer and safer rules for crypto.
In April, the Blockchain Transparency Institute published a study on the manipulation of trade volume on stock exchanges. Trade shows tamper with the data to gain a more favorable position on CoinMarketCap and to attract more customers. The report contains shocking discoveries, such as:
“Approximately 88 to 92 percent of the daily trading volume is manufactured. The daily trading volume of bitcoin is approximately 92 percent manufactured. Of the 40 largest exchanges with actual volume, the volume of bitcoin is around 65 percent manufactured. Almost all this manufactured volume comes from OKEx, Bibox, HitBTC and Huobi. ”
Bitwise also wrote two similar reports (PDF) with the same conclusions and sent them to the SEC. The purpose of this is to enforce better regulation (in which Bitwise with its ETF will play a leading role, of course).
The expectation is that due to the enormous influx of institutional capital and liquidity at Bakkt, it will become increasingly difficult for bad parties to manipulate the volume.
Kelly Loeffler, CEO of Bakkt: “Bakkt finally gives investors the opportunity to operate within a federally regulated stock exchange.”