Will Bakkt Pump Bitcoin?

Conor Maloney

December 21, 2018

Bakkt, the futures market for Bitcoin being rolled out by New York Stock Exchange owner ICE, is close to approval from the US government and could change the cryptocurrency landscape in a major way.

Bakkt has been working with the Commodities and Futures Trading Commission (CFTC) to gain approval for its business plan which involves allowing investors easy access to Bitcoin price action.

Settling Contracts in Dollars

Other Bitcoin futures exchanges in the US are settled in fiat, meaning investors through markets like CME and CBOE are settling gambling on Bitcoin price movement with little to no effect on the market price of Bitcoin.

However, Bakkt contracts will be backed by actual Bitcoin purchases. While traders using Bakkt will not need to handle any Bitcoin keys, download wallets, go through exchange KYC processes, or any of the other steps that are seen as complicated and exclusionary towards certain investors, the exchange itself will match user trades with identical Bitcoin purchases and impact the market accordingly.

Bakkt is predicted to be very widely used, meaning the so-called institutional money phenomenon may be finally about to hit crypto.

While there are concerns that such activity may have a slightly centralizing effect on Bitcoin, most people agree that it will drastically increase the market cap and perhaps the price of Bitcoin as well.

Price Increase Incoming?

Kelly Loeffler, the CEO of Bakkt, said “It’s great to have cash-settled, but there’s a need for physical delivery,” said Loeffler, pointing out that Bakkt aims to grant easy access to new traders and investors more comfortable with their familiar trading setup and safeguards like custodial insurance.

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

Securities litigation attorney Jake Chervinsky said:

Also noteworthy is the fact that Bakkt will custody and deliver real bitcoin. That means institutional inflows would reduce supply and thus (maybe) increase price too.

This is different from other regulated futures markets like CME and CBOE, which only deal in cash-settled futures.

Launching In January

Bakkt is due to commence operations on January 24, and pending CFTC approval the market will open Bitcoin trading at that time.

People are divided over the potential impact, with high-profile figures like Andreas Antonopoulos against the idea due to the power it could give institutions in Bitcoin consensus decision making. One way or another, Bakkt is almost here, and with it comes a brand new wave of Bitcoin investment.

What’s more, Bakkt is only the beginning – other investment vehicles are vying for approval as well, all aiming to do one thing – open up the Bitcoin market to mainstream traders. With the most likely candidate due to launch in just over a month, the cryptocurrency market waits with baited breath to see how ICE opening the floodgates to traders will affect the price of Bitcoin.

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