With a list of financial backers reading like a who’s who on Wall Street, the highly anticipated platform Bakkt is set to launch its futures exchange next week – and Bitcoin could go sky high as a result.
Not heard of Bakkt? Here’s what you need to know.
Bakkt is a cryptocurrency platform, but with a twist. It will allow Bitcoin futures to be traded through contracts. These contracts allow traders and investors to wager where they think the Bitcoin price will be in a day or month’s time.
Unlike the futures contracts currently available on other platforms, which track Bitcoin price indices and use unregulated data, the contracts available on Bakkt will be based on “deliveries” of actual Bitcoin to a highly secure “warehouse”, the FT reported in August.
Bakkt is using much of its parent company architecture and services to be able to offer – and offer securely – this to investors. Its parent, Intercontinental Exchange (ICE), owns and operates one of the world’s largest networks of marketplaces. These marketplaces allow traders to buy and sell stocks, bonds, futures and other types of securities.
It owns the New York Stock Exchange, for example, so it is no small fry and is one of the first “traditional finance” companies to have taken a bite out of the digital market.
Bakkt was meant to launch it last year, but regulatory hurdles, overrunning work and too much investor interest delayed its plans. Now the hype has been building and building up to the launch, and market watchers foresee a spike in the Bitcoin price as a result.
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But why?
One of the ideas behind Bakkt is to make crypto something people use every day, rather than see them just as an investment or something to trade. Futures are used in traditional finance by businesses as varied as fishmongers to airlines to smooth their outgoings in a particular currency and allow them to strategically plan.
The theory, which is robust enough, is that businesses dealing in cryptocurrencies could do the same thing.
One of the reasons for a potential price spike is that the more someone uses something, the more vital it becomes to daily life, and if it is in limited supply – like most currencies, crypto or traditional – the more it could go up in value.
Additionally, the existence of these hedging tools makes it just a little bit more likely that risk-averse investors, such as pension funds, might finally join in the crypto game.
There have been attempts to launch Bitcoin futures before, with CME – a big ICE rival – having a go at the end of 2017. They have not been the success many had hoped, but Bakkt seems to think it has the answer.
With claims of safekeeping of assets and insurance in case anything goes wrong and supporters including Microsoft, Starbucks and several high-profile hedge funds, ICE has gone big with Bakkt.
And you might not need to be a trader or futures connoisseur to benefit from it joining the crypto-party…
BUY BITCOIN NOW
Cryptoassets are highly volatile unregulated investment product. No EU investor protection. Your capital is at risk.
Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework. Your capital is at risk CFDs work, and whether you can afford to take the high risk of losing your money.