Bakkt Launched its Bitcoin Futures at Long Last
Jeff Sprecher, Intercontinental Exchange chairman and CEO, with his wife Kelly Loeffler, an ICE executive who will be CEO of the startup Bakkt, on the trading floor of the NYSE on July 9, 2018. Gillian Laub/Fortune

The long-awaited Intercontinental Exchange-backed BTC warehouse and futures contract facilitator Bakkt was finally launched. After two delays and 13 months of speculation, the Bitcoin futures exchange and digital assets platform opened service to institutional investors to obtain cryprocurrency positions in a venue that is federally regulated.

Trading opened at midnight UTC and closed at 22:00 and a somehow new option is that, whomever is interested will be able to view what is the demand among big traders. According to Bakkt’s FAQ, the service’s data feed will be available freely until June 2020 and will then start to require subscriptions from users.

As previously mentioned, Bakkt’s futures are physically settled which means that all buyers receive BTC at expiration. In contrast, the futures available at the Chicago Exchange CME Group since 2017 are cash-settled.

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What is exclusive is that, ICE’s bitcoin futures contracts expire after a day i.e. the BTC is delivered on the second business day after the date of the contract.

Bakkt is offering a 30-day Bitcoin futures contract, with the one-day version more familiar to institutions also available.

CEO of crypto derivatives exchange operator LevelTradingField, Lanre Sarumi commented on the new service:

“The dailies make their offering like the cash market, but with the ability to short. That’s huge.”

 Sarumi also added that the contract is well designed and that:

“The basis to the cash market would be very tight. It’ll be interesting to see if it’s the lead or the follower. In theory the cash market should dictate the price of the derivatives market. In practice, it’s the other way around for a lot of commodities.”

The impact

Everyone should remain calm as it is quite improbable that ICE’s new futures contracts will cause a serious near-term impact on the crypto market as the company is not searching for retail customers yet. Bakkt is expecting serious institutional requests for its futures contract but is not aware how serious they may be in fact.

John Todaro, director of research at TradeBlock, an institutional trading tools provider foresaw that:

 “We could see decent trading volumes for the product.”

But… “I would expect, however, that the demand would be somewhat in line with current cash-settled contracts, such as those offered by the CME.”

Todaro expects that an instantaneous rush in demand is very unlikely as some kind of an institutional adoption catalyst will not occur. He also added:

“It will take time for these entities to become comfortable with the asset class, identify strategies that are best used to trade the space, understand crypto market liquidity, and also understand the different regulatory and tax obligations across jurisdictions they operate in.”

The public is still unaware how much BTC has been deployed to Bakkt since the opening of the warehouse (September 6th), where customers can deposit Bitcoin. What is important is that, in order to purchase a contract, all customers must guarantee a minimum of $3,900 of assets in collateral while speculators must guarantee almost $4,300.

No addresses for Bakkt’s custodian wallet have been disclosed yet since the warehouse opened. A spokesperson did not answer questions about the amount of BTC that was deposited either.

Still, the effect should be visible

All speculation aside, ICE launching futures contracts is really a very crucial move for the industry. John Todaro shared that “traditional financial institutions are quite conservative.”

According to him: “The offering demonstrates that more and more Wall Street institutions are taking a close look at digital currencies and want to gain exposure to this new asset class.”   

Still, following Todaro’s thoughts: “some of the recent positive market moves across digital currencies have been from traders acting on the Bakkt launch.”

Nevertheless Bakkt’s launch may be kind of a catalyst for other expected products in the United Stated like the Bitcoin exchange-traded fund (ETF).

As a conclusion Todaro noted:

“This offering, in addition to the CME’s, can help regulators become more comfortable with digital asset trading and market infrastructure.”

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