BAKKT is a company that works as a platform designed to offer digital assets and financial derivatives also linked to cryptoassets and it was created in August 2018 by the Intercontinental Exchange (ICE) that runs the New York Stock Exchange.Source: coincentral.com
This great regulated platform was designed to change many things in the crypto market so that institutional capital can properly land on it as it has turned its attention to integrating it into the world of traditional finance through futures and other financial derivatives such as ETFs (see the article on crypto-derivatives).
When this platform was launched in 2019 with a certain delay and started to integrate bitcoins and the cryptocurrencies into regulated markets, there was a boost in the cryptocurrencies in terms of capitalization and increase of market prices. Although already the CME (Chicago Mercantile Exchange) and the CBOE (Chicago Board Options Exchange) offered Bitcoin futures and options since 2017 with a great response from investors who did not dare to buy directly cryptocurrencies due to the lack of regulation and an appropriate infrastructure.
Brief history since the Bakkt’s creation:
Since its conception in August 2018 by the ICE, Bakkt has achieved the following milestones:
- By the end of 2018, the Bakkt platform had raised more than $182 million from institutional investors such as the Boston Consulting Group, ICE, Microsoft's venture capital, Starbucks and other big names.
- In July 2019 it was launched and in September of that year BTC futures trading began in the platform.
- In September 2020, Bakkt announced a record volume of futures contracts linked to BTC, accumulating 15,955 BTC (which at that time was over $200 million).
What are the BTC futures contracts as the main financial product of the Bakkt platform?
When the Bakkt platform was launched, BTC futures were the most expected since up to that moment there had been a clearly positive experience in the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) that was already trading them.Source: coinnewsextra.com
A financial future is a physical contractual agreement in which the parties agree to buy and sell a financial asset at a certain price and on an agreed date to protect themselves from the volatility that characterized this assets. These are financial tools to provide stability and certainty to the market and that’s why they are so attractive.
The negative side of these financial derivatives is the danger of creating a fictitious market that may not correspond to reality, since what you have is not bitcoins but a right over them documented in a legal agreement, which may be subject to manipulations that distort the markets if they are wrongly applied.
However, Bakkt futures differ from those offered by the CME and CBOE in that they are physically delivered to investors what is considered safer and more attractive than those delivered digitally.
What is the purpose of this regulated platform?
The launch of Bakkt is presented as an opportunity to regulate bitcoin and other cryptocurrency ETFs by the SEC (US Securities and Exchange Commission), as the platform is working to meet the expectations of the SEC to be able to carry out the regulation of these financial derivatives on BTC or other cryptos, given that until now they had been rejected by this regulatory.Source: thecoinrise.com
The Bakkt platform is shown as a system to integrate the crypto world with traditional finance by facilitating the regulation of crypto-derivatives by the SEC, creating an ecosystem where certainty components are added through BTC and other crypto futures documented by physical legal agreements that give more security to investors
Other Bakkt Ecosystem Services
Within this ecosystem, other financial services are also offered to provide security to the crypto-derivative market using Microsoft Cloud solutions as cold storage and asset liquidity options, and not only to sell, buy and trade digital assets.
Indeed, Bakkt offers custody services for the digital assets in question with a high standard of security to ensure the data protection not only in terms of its integrity but also against theft.
So what does the Bakkt platform represent in conclusion?
In summary, Bakkt represents a great opportunity for large financial institutions to enter the crypto market to achieve the much desired mass adoption that can be closer than ever before since ICE manages the largest Stock Market in the world. Although Bakkt is not offering a great innovation in the crypto landscape, it is nevertheless backed by large companies and highly reliable institutions. Only this platform has the power to tip the scale to channel large amounts of funds to the crypto markets.
The capital invested in cryptos pales in comparison to that invested in stocks, options, futures, bonds, swaps and other derivatives in traditional markets but these are declining markets because they are partly toxic and/or at negative levels, so it is not surprising that investors are looking for new ways to get profits from their portfolios.