The highly anticipated launch of the Bakkt Bitcoin futures trading platform took a major step forward, on schedule no less, by announcing acceptance testing for its growing list of international paticipants. What was the reaction of Bitcoin prices? They dropped five percent… ? Perhaps, it was a “sell-on-the-news” type of market reaction or possibly something else, but the general feeling across the crypto community is that this move by Bakkt opens the door for true institutional investor participation and will have a positive long-term impact on BTC valuations, if not today, then surely in the future.
We reported back in December that the Bakkt platform “will allow institutional customers to perform various operations with digital assets as part of a seamless global network”. We further reported: “The crypto ecosystem, primarily exchanges, needs to mature to a higher level. Regulatory oversight would help to remedy the situation, but a quicker path would entail firms like Bakkt to jump into the fray with a modern set of effective clearinghouse tools already operational. ICE, the parent of the New York Stock Exchange (NYSE), intends to provide this piece of the puzzle, hopefully, beginning in late January. “
January came and went, another delay. In April, we were told:
Bakkt will also integrate consumer and institutional applications in a seamless, regulated manner, thereby providing the transparency and trust expected by both groups. Bitcoin futures with custodian services will also be part of the first phase of operations, subject to the approval of the Commodity Futures Trading Commission.
The CFTC seemed to be the reason of the holdup, but J. Christopher Giancarlo, the CFTC chairman at the time and a noted friend of the crypto community, alerted the community that infrastructure details, peculiar to the futures trade, had to be worked out in the background before the green light could be given. It was just a matter of time, in his estimation. We were then informed in May by CEO Kelly Loeffler that, “All systems are set to go in June, with some offerings slated for July testing”.
And so, here we are, testing right on schedule with the “leading edge, state-of-the-art” futures trading platform that will actually settle physically “in kind”, not in cash, as with other futures exchanges. Analysts have already claimed that these futures contracts will provide better price discovery and liquidity for Bitcoin in the market, although the near-term effect may be a significant drop in prices, until a new equilibrium forms.
We may be still, however, jumping the gun on Bakkt’s true launch date. It has now been reported that one additional “custodianship” regulatory approval is necessary, this one due from the New York State Department of Financial Services. No date has been given as to when this permit might be forthcoming. Testing can proceed, and per a Bakkt blog post: “Bakkt’s limited purpose trust company will serve as a qualified custodian for bitcoin”.
While Bitcoin prices did fall on the same day as the Bakkt announced testing regime, analysts are not attributing the Bitcoin price decline entirely to the Bakkt announcement. News of a potential permanent crypto ban in India may have also had an impact. Of course, the need of an additional permit and the prediction that prices might fall before rising may also have had an influence, but in any event, Bitcoin is presently languishing in $9,700 territory. Based on purely technical grounds, the majority of analysts is expecting additional declines. Time will tell.