Bakkt has launched its first physically-settled bitcoin futures products, and to much ado.
Since New York Stock Exchange owners Intercontinental Exchange (ICE) announced the Bakkt platform and associated plans for bitcoin futures last year, it’s been the hope of many stakeholders in the cryptoeconomy that the enterprise’s rollout could mark a turning point for mainstream attention around cryptocurrencies.
Of course, it remains to be seen how precisely Bakkt will fare in the years ahead. But the venture has major backers, and as of September 23rd it now has major derivative offerings — daily and monthly contracts that track the bitcoin price — that in the very least will further legitimize the cryptocurrency going forward and introduce so-called “digital gold” to new audiences.
The first Bakkt Bitcoin Futures trade was executed at 8:02pm ET at a price of $10,115
— Bakkt (@Bakkt) September 23, 2019
On the news, Bakkt chief executive officer Kelly Loeffler echoed that sentiment, saying the start of the company’s derivatives operations should lead to more mainstream investors feeling comfortable with bitcoin:
“As institutions enter this emerging asset class, they will continue to look to secure infrastructure and the regulatory certainty that it provides. Importantly, these futures contracts now serve as benchmarks established by a trusted price discovery process upon which investors can rely.”
The futures launch went according to schedule, as Loeffler revealed last month that September 23rd was the target release date for the derivatives. However, Bakkt had previously delayed the offerings multiple times as it worked to finalize its preparations.
With the futures contracts now publicly available, Bakkt joins the likes of mainstream derivatives marketplace CME Group, which launched its first bitcoin futures product in December 2017. The Chicago Board Options Exchange (CBOE) shuttered its own bitcoin futures unexpectedly earlier this year, meaning Bakkt and CME Group are the main providers in the arena for now.
A New Kind of Bitcoin Futures, But Low Demand to Start
Notably, the Bakkt Bitcoin Futures products are the first in the U.S. to deliver BTC to buyers at contracts’ expirations. These deliveries are facilitated by the exchange’s custodial wing, Bakkt Warehouse.
However, the derivatives didn’t experience a considerable flurry of trading activity to start.
Low volume on the contracts’ first day led to a boon of social media commentary, with some poking fun and others expressing surprise at the perceived lack of interest around the offerings. By the end of Monday, 71 monthly contracts and 2 daily contracts representing 72 bitcoin — or roughly $700,000 at current prices — had been purchased.
Larry Cermak, Director of Research at cryptocurrency trade publication The Block, noted on Twitter that initial volume around Bakkt’s futures was all but meager compared to the almost $50 million in bitcoin futures that CME Group handled intraday at that point. But Cermak wasn’t pessimistic about Bakkt’s long-term prospects.
In comparison, CME Bitcoin futures had a 24-hr traded volume of $48.2M. pic.twitter.com/4BlvxnZejj
— Larry Cermak (@lawmaster) September 23, 2019
“The activity will take week/months to get going and I really think it will,” Cermak wrote.
Three Arrows Capital CEO Su Zhu was of the same mind, having estimated earlier that “Bakkt will be likely first a trickle and then a flood.”
So Can Bakkt Live Up to the Hype?
ICE’s backing of Bakkt cannot be overstated, at least when it comes to the exchange’s potential.
In owning and operating some of the world’s largest mainstream exchanges and marketplaces, ICE is as well positioned as any company when it comes to having the resources and know-how to help spearhead the cryptocurrency exchange of the future.
This dynamic has some projecting that Bakkt has what it takes to become one of the most successful crypto exchanges ever. To be sure, only time will tell if the platform does end up rising to the top of its field. But betting against ICE is indeed a big bet, and they’re betting Bakkt will prove fruitful.