How Bakkt could affect the price of Bitcoin

Alejandro Brega
Dec 22, 2018 · 3 min read

Bakkt, a Bitcoin futures exchange operated by ICE, the parent company of the New York Stock Exchange (NYSE), is close to receiving the green light from the US government.

Bakkt has been working with the Commission for Trade in Goods and Futures (CFTC) to approve its business plan, which revolves around the physical delivery of Bitcoin to its investors.

What separates Bakkt from other Bitcoin futures markets

The stock exchanges of Bitcoin futures existing in the US market. As CME and CBOE, they are settled in cash, which means that their contracts are settled with the US dollar. UU And not with Bitcoin.

As such, given the limited supply of CME and CBOE contracts, the effect of the two futures markets on Bitcoin’s real price could be minimal.

Kelly Loeffler, the CEO of Bakkt, said that contracts settled in cash have some benefits, but physically-resolved Bitcoin futures contracts are needed to strengthen the infrastructure that supports the asset.

“It’s great to have a cash settlement, but there is a need for physical delivery,” Loeffler said, emphasizing that Bakkt’s goal is to create a comfortable environment for investors to invest in digital assets.

The physical delivery of Bitcoin guaranteed by the Bakkt Bitcoin futures market will provide investors with the custody of cryptographic assets and will deliver the assets to all investors in the market. Depending on the demand for the asset and commercial activity on the Bakkt stock exchange, Bakkt’s scheduled launch in January could affect the supply of the dominant cryptocurrency and lead to an increase in the price of Bitcoin.

Jake Chervinsky, a lawyer in defense of law enforcement and securities litigation at Kobre & Kim, said:

Also noteworthy is the fact that Bakkt will guard and deliver real bitcoin. That means that institutional flows would reduce supply and, therefore, also increase the price. This is different from other regulated futures markets such as CME and CBOE, which are only traded in futures settled in cash.

0 / @Bakkt plans to launch next month on December 12, and some people expect another race of cryptographic bulls to start. Now seems like a good time for a quick discussion on: — What is Bakkt?

- why it could be exciting

- When regulatory approval is obtained. Thread. 👇 — Jake Chervinsky (@jchervinsky) November 6, 2018

In the USA UU., ICE is recognized as a designated contract market registered by the CFTC that allows the institution to certify futures products without the approval of the CFTC.

However, a Bitcoin futures market is structurally different from many of the markets supported by ICE and, as such, even if ICE does not need direct approval from the CFTC, Chervinsky said he still needs to work with the commission to obtain approval. complete of its new development market.

“But just because ICE can self-certify Bakkt futures contracts does not mean that Bakkt can totally ignore the regulatory approval.The CFTC still has jurisdiction over self-certified financial products.” Conclusion: If the CFTC does not want a contract to be negotiated of futures, it will not, “explained Chervinsky.

One step closer

Bakkt is one step closer to starting its operation on January 24, 2019, its scheduled launch date. If the institution can obtain approval from the CFTC in early January, it is expected to open the Bakkt futures market before the published release date.

The potential impact on the price of Bitcoin by Bakkt and other outstanding investment vehicles, such as an exchange fund (ETF), remains uncertain. But, due to the physically resolved element of Bakkt’s product, it is likely to have a noticeable effect on the trend of digital asset prices.


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Alejandro Brega

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