BitcoinSpotlight

Bakkt Bitcoin Futures to Finally Bring Crypto Institutional Investment

While another delay in bitcoin exchange-traded funds (ETF) tested the patience of crypto community, crypto enthusiasts don’t have to wait long for Bakkt. Recently, it was revealed that Bakkt bitcoin futures and warehouse have been cleared by the New York State Department of Financial Services (NYDFS).

A futures contract for some asset is a legal agreement whereby parties decide to sell or buy the asset in the future while agreeing to some specific predetermined price and time. Following the clearing, Bakkt has announced to launch future and warehouse products to clients on 23rd September 2019.

The latest prospective development is welcomed in the crypto space. Even well-renowned crypto influencers and experts such as Anthony Pompliano and Jake Chervinsky took over to Twitter to share their views.

A year ago, Bakkt shared its vision of introducing custody and physically-delivered daily and monthly bitcoin futures contracts to welcome the participation of institutions in the crypto space. Since then, various efforts have been made to get through the approval procedures.

According to the CEO of Bakkt, in addition to NYDFS, the U.S. Commodity Futures Trading Commission (CFTC) has also allowed Bakkt to launch its products. In this regard, Bakkt CEO Kelly Loeffler explained:

Our contracts have already received the green light from the CFTC through the self-certification process and user acceptance testing has begun. 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.

Loeffler also told that, previously, several events were held in New York and Chicago. According to her, several customers, regulators and market participants attended these events to discuss the crypto industry. CFTC Commissioner Dawn Stump and  SEC Commissioner Hester Peirce were also part of these events where institutional access to digital assets was under focus.

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Loeffler is of the view that today, the markets of digital assets have developed globally. However, despite that, she thinks that retailers are served more by these markets rather than institutions. Therefore, Bakkt aims to ease the participation of institutions and accelerate it.

In the past, the COO of Bakkt, Adam White explained that bitcoin futures contracts would be traded on ICE Futures U.S. (IFUS) and cleared on ICE Clear U.S. (ICUS). As these exchanges will be regulated by CFTC, they are expected to be different from trading exchanges in several aspects such as risk management, compliance, etc. This means that Bakkt futures contracts will be well-guarded against unregulated manipulative spot market activities that affect the benchmark bitcoin price.

A report published by Bitwise Asset Management had addressed and explained the impact of activities such as forge reporting of bitcoin volumes and other data. The report concluded that due to fake volume and wash trading, exchanges were deceiving people with wrong perceptions related to the bitcoin market. Therefore, Bakkt futures contracts while administering transparency are expected to gain the trust of institutions and people.

For Bakkt Warehouse, the CEO claims that the cyber and physical security measures taken are similar to those taken at the world’s renowned markets such as the New York Stock Exchange (NYSE). Overall, there are various other steps implemented as well to ensure that people can fully trust the platform provided by Bakkt.

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The notable measures include a guaranty fund contribution, compliance, anti-money laundering program and insurance. About $135 million insurance for Bakkt Warehouse and addition of $35 million to the existing guaranty fund have been successfully managed.

Institutional investments are very massive as compared to individual investments. The large inflow of investments in the crypto market can expand the market and make the struggling adoption of cryptocurrencies extremely serious and strong. But for institutions to enter the market, a ‘safe’ resort is needed. And Bakkt provides a safe platform to institutional investors by providing a trusted, regulated and secured trading platform for cryptocurrencies.

Until now, the institutions have been sitting on the sidelines, waiting to enter the crypto space. While many eyes focused on the approval of bitcoin ETF, people also looked forward to Bakkt to open the doors for institutions. Although the consequences of Bakkt futures contracts and warehouse on bitcoin ETF aren’t crystal clear at this moment, the dynamics of crypto space will change for sure with the entrance of institutional investors.

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Fatir Malik

Electrical engineer by profession, turned into blockchain developer. Fatir contributes regularly with his insights about latest developments in fintech sector. Contact the editor at editor.opinions@blockpublisher.com

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