Earlier this month, ICE also known as Intercontinental Exchange, announced the launch of a new crypto focused company called Bakkt. In what I think is one of the most significant steps towards driving mainstream adoption of digital assets by financial institutions and retail consumers.
If you aren’t familiar with ICE (you should be), they own the New York Stock Exchange NYSE, NYSE ARCA (largest marketplace for ETFs) and many other exchanges around the globe. Jeff Sprecher is the founder, chairman, and CEO of ICE — with a track record of success.
At the helm of Bakkt is no stranger to the investment world, Kelly Loeffler. Loeffler has been with ICE for 16 years most recently as ICE’s Chief Communications & Marketing Officer. In her new role as the CEO of Bakkt, Loeffler also serves as a member of ICE’s Executive Management Committee. In addition to a long working partnership with Jeff Sprecher, she also married him in 2004. Loeffler has had a hands-on, front row seat through all of ICE’s success. Experience? Check!
“Bakkt is designed to serve as a scalable on-ramp for institutional, merchant and consumer participation in digital assets by promoting greater efficiency, security and utility,” said Kelly Loeffler, CEO of Bakkt. “We are collaborating to build an open platform that helps unlock the transformative potential of digital assets across global markets and commerce.”
In a recent article, I wrote about the importance of ETFs and how easy investor access to Bitcoin ETFs could easily drive Bitcoin’s price well above $35K. So while I still believe it to be true, there’s an even bigger story with Bakkt. Here’s what we know about Bakkt.
Bakkt is building an open, seamless global network to enable you to buy, sell, store and spend digital assets simply, safely and efficiently.
Backed by Intercontinental Exchange’s proven financial market infrastructure and technology, Bakkt’s secure global platform will connect investors, merchants and consumers, making it easier, faster and more cost-effective to access, trade and use digital assets. Bakkt’s open-source, neutral platform will be designed to meet applicable regulatory requirements, and to support innovation around digital assets and blockchain applications.
Physically-Backed Futures — (hence the name Bakkt) planned for launch in November of this year. ICE expects to launch its first physically delivered Bitcoin futures and warehouse in coordination with Bakkt (subject to regulatory approval).
Two key points here:
- Bakkt’s platform enables institutional investors to buy Bitcoin via a regulated market infrastructure. Something every ETF, money manager or financial institution needs to invest in Bitcoin safely.
- Physically-Backed. Yeah, we have CBOE Bitcoin Futures, so what’s the big deal? Well, this is very different. Let me explain.
CBOE Futures have no physical backing. Instead, they settle on spot-price. When you buy a CBOE futures contract, there is no real BTC behind it. Instead, it’s just the equivalent of the BTC value in fiat. CBE futures take money that could be invested in real Bitcoin (market cap) and instead divert it away. These futures do nothing to the total amount of Bitcoin available in the marketplace.
In contrast, physically backed futures do the opposite. When you buy a physically backed future, actual Bitcoins are purchased and removed from the market. So when institutions begin leveraging Bitcoin with Bakkt, the actual Bitcoin is removed from the market. Essentially driving price higher as supply diminishes and contributing to the overall market cap. As Loeffler recently explained in a Medium post, “As such, our new daily Bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset.”
ICE and Bakkt have plans to launch futures in November (pending regulatory approval)! As financial institutions line up to make these investments, we should see tremendous Bitcoin action. November is only 60+ days away so get ready.
However, there’s so much more potential from Bakkt than futures. Bakkt is building a platform to enable consumers and institutions to buy, sell, store and spend digital assets seamlessly. These transactions and storage make the physically backed futures possible. So here’s what’s potentially coming next:
Bakkt partnerships include Starbucks, Microsoft, and Boston Consulting Group. Now it’s not readily apparent that Microsoft is providing anything more than Azure cloud services, (no mention of Dynamics, AI or Microsoft Pay). However, Starbucks brings an interesting perspective to this mix.
Consumer Retail — Starbucks is one of the leaders in mobile retail transactions. I’m sure many of you have used a Starbuck gift card, or better yet, loaded the Starbucks app on your phone and paid for a triple venti mocha by scanning your phone at their POS. Bakkt’s vision includes supporting the spending of digital assets by consumers. I can easily envision the innovation the likes of Starbucks will bring to the table.
“As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted and regulated applications for consumers to convert their digital assets into US dollars for use at Starbucks,” said Maria Smith, Vice President, Partnerships and Payments for Starbucks. “As a leader in Mobile Pay to our more than 15 million Starbucks Rewards members, Starbucks is committed to innovation for expanding payment options for our customers.”
I can only imagine how valuable Bitcoin and other digital assets will be when consumers are seamlessly paying for their lattes using Bitcoins.
Bakkt has undoubtedly staked a mighty big claim in the blockchain ecosystems — providing a platform for investors, merchants, and consumers. I’m sure it’s easier said than done. November is right around the corner giving us a glimpse into Bakkt’s deliverability. Nevertheless, I think it’s clear to see how this giant’s contribution can be far more significant than the ETF buzz we’ve all been chasing.
Moreover, this is only the beginning of the financial services entry into blockchain. What’s on tap for Nasdaq, Goldman Sachs, Morgan Stanley, Schwab, JP Morgan Chase and Bank of America Merrill Lynch?
Originally published at ironwood.io on August 23, 2018.
All content provided by IRG is strictly observational and should not be considered financial advice. IRG is not an investment group, but a research group that meticulously scans the market for those projects deemed to have the most potential. Crypto-assets are subject to high market volatility and risk. Seek a licensed professional before making any investments.