The most awaited development in crypto is less than a month away from swinging in with full force. Bakkt will be launching their futures contracts on September 23, 2019, but have announced in a tweet on August 28, 2019, that they will open their custodial warehouse on September 6.
What the Launch of Bakkt Signifies
Unlike BitMex and Deribit, which allow customers to trade in derivative products that are settled in cash, Bakkt will be the first physically settled futures exchange – although they may face some competition from CoinFlex.
Institutional adoption of cryptocurrency has been gradually rising, but the lack of efficient financial infrastructure has them worried about safety and efficacy.
Bakkt is backed by the Intercontinental Exchange which owns the New York Stock Exchange (NYSE). Having the most capitalized stock market as a principal backer is a non-verbal statement that Bakkt can be trusted to fulfill their obligation and offer high-quality service.
The launch of their custodial warehouse signifies that the product is ready and has successfully cleared the user testing stage. Bakkt will now start processing customers and accepting their BTC deposits. These deposits will serve as collateral for settlement of futures customers trade-in.
While BitMex and others target retail investors, Bakkt is leaning toward institutions to give them the ability to both hedge and speculate on the price of bitcoin.
Efficient Price Discovery
Physically settled futures help financial markets gain a more robust price discovery mechanism as it sets the price that institutions and larger traders are willing to value bitcoin at.
While the opinion of these parties shouldn’t be the sole cause of bitcoin price discovery, it does help bring more rational thinking into one of the most exuberant and volatile markets.
Bakkt was earlier slotted to launch in early 2019, but several regulatory delays pushed the launch to late 2019. Many believe that Bakkt’s delay along with the ETF rejection were prime causes for the widespread deterioration of sentiment in 2018.
This is great news for Bitcoin as a speculative asset, but what about Bitcoin the global settlement layer? Focus has shifted completely to the investment side, almost to the extent that not many outside of the long-standing community care about development on the network.