Intercontinental Exchange (ICE) has revealed plans to offer Bakkt’s first physically sorted Bitcoin futures contract via a tweet shared on Tuesday, September 25, 2018.
The crypto futures, which will be delivered in Bitcoin will be available to be traded against the U.S dollar, British GBP and the Euros. The physical crypto futures is designed to attract investment from institutional investors, who have so far stayed away from the market. Bakkt, notwithstanding, promises a “regulated ecosystem” where investors can invest in cryptocurrency product.
ICE stated in the tweet:
“Our first contracts will be physically delivered Bitcoin futures contract versus fiat currencies, including USD, GBP, and EUR. For example, buying one USD/BTC futures contract will result in daily delivery of one Bitcoin into the customer’s account.”
Ray of Hope for ETF
Bitcoin futures contracts differ from exchange-traded funds (ETFs), as the investor cannot trade in the market without physically taking ownership of the underlying cryptocurrency.
So far the SEC has rejected several proposals for the ETF with some analysts suggesting the agency cannot give its approval under the current regulatory climate. Bakkt’s physical crypto futures is targeting the same market of institutional investors, but it offers physical BTC tokens to the investors and not the paper claim that comes with an exchange-traded fund.
Bakkt resolves two of the issues that led to the rejection of the last ten ETFs—lack of trusted price formation and reliance on futures markets and derivatives. Bakkt CEO Kelly Loeffler published a post to assuage some concerns in the community. She said the platform’s goal is to promote “efficient price discovery.” She went on to state that the firm has no plan to allow clients trade on margin or put a paper claim on a real asset.
Her statement reads:
“A critical element to price discovery is physical delivery. Specifically, with our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded. As such, our new daily Bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset. This supports market integrity and differentiates our effort from existing futures and crypto exchanges which allow for margin, leverage and cash settlement.”
Bottlenecks Associated with Bitcoin
Bakkt will offer solutions that solve a wide range of issues that affect market adoption of cryptocurrency. These solutions include the monitoring of cryptocurrency fraud and manipulation in market trades using a surveillance mechanism that can detect and abate such activities in a federally regulated market “of size.” Also, Bakkt will provide qualified custodian for cryptocurrencies, thereby enabling various institutional investors to make investments in the crypto asset class.
Furthermore, the element of scalability is also an added advantage for the platform—enhancing the speed and capacity of bitcoin till it increases the volume of transactions handled simultaneously. This improved feature will surpass Bitcoin’s current speed of 4-7 transactions per second. Sustained scalability for bitcoin by market capitalization could lead to a plethora of business and consumer applications that could make trade cheaper and more efficient to consumers and businesses across the globe.
Bakkt will provide a new medium for eminent money managers to offer pension funds Bitcoin mutual funds and ETFs as highly regulated mainstream investments. Finally, the hesitation often surrounding transactions with Bitcoin will be gone for good as Bakkt is a more reliable system for trades.
Zaif, one of Japan’s leading exchanges lost $60 million in a recent security breach. This is not the first time a crypto exchange has been hacked. CoinCheck and Coinrail suffered a similar fate earlier. Bakkt’s experience under the regulated exchange experience of ICE is believed to have the formidable infrastructure to detect fraud and counter market manipulations.
