It is too early to write off Bakkt

The long-awaited launch of Bakkt ended with a hiss. Where everyone expected fireworks, we were given a soaked wick. The first days there was only 60 bitcoin in trading volume. The sentiment is that Bakkt has already failed.

This is the start of a slow development

But Jemima Kelly of the Financial Times believes that this is just the beginning of bitcoin’s financial legitimacy, and not a rocket that will help the course rise to great heights in no time.

The expectation was that with the launch of Bakkt, instant baking with institutional money would come in. The fact that the figures showed the opposite was a disappointment for many.

But if you only look at the figures from the first days, you will miss the bigger picture and the real importance of Bakkt.

The best money is smart money. And according to Kelly, smart money does not like uncovered, targeted bets in a hyper-volatile asset class.

Competition from all sides

Many analysts believe Bakkt’s most important addition is that the futures contracts are handled with bitcoins, rather than dollars. This is a milestone that needed to be achieved to push the bitcoin course up. That is also the reason why Bakkt’s development has taken so long, says Craig Pirrong in Streetwise Professor.

Because contracts on Bakkt are handled with bitcoin, they not only have competition from parties such as CME, but also with the online crypto exchanges.

Bakkt does have something that many online exchanges do not have: credibility.

Most are unreliable

Apart from a few large and reliable exchanges, most bitcoin exchanges are still somewhat shady. This is also apparent from a study by Bitshares. These exchanges get their income from wash trading and pump and dumps. At such stock exchanges, it is difficult to determine the value of bitcoin. Stablecoins also play a major role in this. You can trade your altcoin or bitcoin quickly and easily for these coins.

Because Bakkt must comply with stricter rules than many other online crypto exchanges, it is expected that arbitration with bitcoin and stablecoins is hardly possible.

And that inspires confidence among investors. That trust pays off in stable partnerships with Starbucks and Microsoft.

Bakkt corrects price

Kelly further writes that some claim that Bakkt’s volumes are currently too low to really make a difference. But she says she’s not sure if that really matters:

“If a market is extremely wrongly priced, it doesn’t take a lot of volume to move the price in the opposite direction. The good thing about Bakkt is that if there is an imbalance between buyers and sellers, it must ultimately have an effect on the price of bitcoin, expressed in real dollars. And not in tether. “