Bakkt, the much-anticipated platform has finally been cleared for launch by the U.S. CFTC and is scheduled to go live on September 23, 2019. As we discussed earlier this year, the Intercontinental-backed futures exchange has the potential to legitimize the crypto space and draw significant institutional investment.
To understand what Bakkt’s September launch really means for Bitcoin, we need to analyze the platform’s offerings as well as the progress made over the last year which has made its launch possible.
The exchange is set to launch two futures contracts:
- A daily settlement contract
- A monthly settlement contract
Both of these will be physically settled, which means actual Bitcoin transactions will take place, and even more importantly, the contracts will not rely on the spot price provided by unregulated exchanges.
As the project originally announced, “Price formation in these benchmark contracts will be supported by proven tools to detect abusive or disruptive trading practices, including wash trades.”
The service, promoted as a regulated end-to-end marketplace, has prioritized institutional-grade compliance, AML regulations, market oversight as well as a guaranty fund and a $125 million insurance – all of which make it one of the most legitimate, secure and reliable exchange platforms in the crypto space.
Moreover, in order to offer physically delivered futures contracts, Bakkt has received approval from the New York State Department of Financial Services to create the Bakkt Trust Company, which serves as a qualified custodian, allowing the platform to warehouse actual Bitcoins.
By checking all these boxes, Bakkt is perhaps one of the most comprehensive solutions for institutional participation in crypto, addressing concerns surrounding market transparency, regulations, liquidity and risk management.
Compared with futures contracts offered by CME and CBOE, which are cash-settled, Bakkt’s offering is very likely to have a positive impact on Bitcoin’s price by pressuring supply due to:
- Physical delivery of futures contracts
- Warehousing requirement
- Institutional investment in Bitcoin
- Reliable price discovery setup
- Setting a positive precedent for other institutional-grade services
- Further legitimizing Bitcoin as a valuable digital asset
Until its September 23 launch, Bakkt will be onboarding and testing the service with market participants, and we believe the launch will serve as a catalyst to drive investments in Bitcoin during Q4 2019.