As per an official release, Bakkt is set to launch bitcoin futures on the ICE exchange on December 12th. Bakkt is considered to be the flagship institutional investor in the cryptocurrency space, with the possible exception of Fidelity Investments. Many are hoping that the launch of these futures could lead to a bitcoin ETF approval, where nine ETFs have already been turned down.
Bakkt bitcoin futures details
The Bakkt daily bitcoin futures contracts are physically settled and held in ICE’s Digital Asset Warehouse. The futures will be cleared by Ice Clear US, Inc, the central counterparty for all ICE cleared forex futures trades. The contract size is for one bitcoin (BTC) with no daily price limit. ICE is regulated by the Commodities and Futures Trading Commission (CFTC).
Bitcoin futures are already available on other exchanges such as the CBOE and CME. Following the launch of bitcoin futures on these exchanges on December 17th, 2017, the price of BTC would go on a downward spiral from highs of nearly USD 20,000 and has not recovered since. However, there is a difference between how the products are offered compared to other exchanges. Positions in Bakkt are pre-funded, meaning that it holds the asset. Other exchanges offer products and then purchase BTC, which has a limited (and even deflationary, given how many BTC have been lost) supply. Bakkt futures contracts offer physical settlement in BTC, and not fiat currency, which gives it a competitive advantage.
What is Bakkt?
Bakkt is a subsidiary of Intercontinental Exchange (ICE), which is the owner of the New York Stock Exchange (NYSE) with ties to banks like J.P. Morgan. They are primarily a cryptocurrency custody solutions provider. Custodian services guarantee to hold assets on behalf of individuals or companies. It is very currently very difficult to find cost-effective custody solutions in the cryptocurrency sector. While there are some third-party solutions available, there are few large-scale institutional options that have all of the regulatory hurdles overcome. Bakkt is essentially aiming to bring the unregulated cryptocurrency class within the regulatory sphere. According to ICE CEO Jeffrey C. Sprecher –
“In bringing regulated, connected infrastructure together with institutional and consumer applications for digital assets, we aim to build confidence in the asset class on a global scale, consistent with our track record of bringing transparency and trust to previously unregulated markets.”
Starbucks is a flagship retailer of Bakkt. While many were hoping that they would allow the purchase of coffee with BTC at their many retail outlets, there have been no official statements indicating that this is to be the case in the near future. Microsoft is also contributing with its Azure cloud computing platform, and the company is in partnership with Boston Consulting Group.
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Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.