BAKKT, CLEARED TO LAUNCH


19.Aug.2019


Bakkt, the Intercontinental Exchange’s (ICE) young subsidiary announced Friday that it had acquired a New York state trust charter through the New York State Department of Financial Services (NYDFS). The approval clears the way for the company to begin offering its highly anticipated physically settled bitcoin futures contracts. The company intends to launch its products on September 23.


In a blog post Friday (which can be accessed here), Bakkt CEO Kelly Loefler wrote, “One year ago, we announced our ambitious vision to bring institutional infrastructure to digital assets with an end-to-end regulated marketplace. That vision will be realized on September 23 when Bakkt launches custody and physically-delivered daily and monthly bitcoin futures contracts in partnership with ICE Futures U.S. and ICE Clear U.S.”


“With approval by the New York State Department of Financial Services to create Bakkt Trust Company, a qualified custodian, the Bakkt Warehouse will custody bitcoin for physically delivered futures,” she said. “This offers customers unprecedented regulatory clarity and security alongside a regulated, globally accessible exchange in a market underserved by institutional-grade infrastructure.”


“While much has been said about deficiencies in crypto markets, the advances being made in the digital asset ecosystem are significant in terms of participants, platforms and applications - not to mention the rapid pace of development that continues through bear and bull markets. And by now, digital asset markets are global and well-developed, but they have largely been designed to serve retail customers rather than institutional participants. Bakkt is bridging that gap to access this market and solve for factors that have slowed institutional participation. Whether concerns relate to a lack of liquidity, market quality and regulation, or issues with reliability, fees, and operational risks, we are addressing these challenges with a transparent offering.”


While Bakkt may be the first to market, the company faces competition: derivatives provider LedgerX and TD Ameritrade-backed ErisX are also looking to offer bitcoin futures contracts to investors. Seed CX and trueDigital are also working to launch forwards contracts, a similar product. 


Additionally, speaking on twitter, Brian Armstrong the CEO of major cryptocurrency exchange Coinbase has said “we know the answer” about adoption.


This new influx of institutional money is not a coincidence.


The water is safe, you can come in now


In other words, big money has positioned itself and is ready for the retail market to move back in. In July last year we reported how digital asset wealth was being transferred from weak hands to the strong (here). As the crypto winter has continued into this year, big money has been quietly positioning itself to take full advantage of market lows. Last month we reported that traditional institutions were positioning themselves for the birth of a new asset class (here), and this is just the beginning. The emergence of new digital asset class only has a market cap of US$270 Billion currently, a mere drop in the bucket in the modern financial world. The writing is on the wall, it’s only a matter of time before digital assets are pushed onto the public by mainstream media and your local financial advisor is recommending a digital asset allocation as a portfolio must have. 


What does this mean for the price? In the very short term it’s hard to say, but with announcements such as this one from Bakkt it is increasingly certain that digital assets are here to stay, and the role they are going to play in mainstream finance is only going to continue to grow.