Institutional finance needs on-ramps, and this one is on the way soon – but not quite yet.
2018 has seen intense speculation about a bitcoin ETF, with numerous applications by different providers denied and a decision on the most promising, the SolidX-VanEck proposal, repeatedly postponed. For a long time the SolidX ETF was the best hope for a means for Big Money – pension funds, family offices, hedge funds and other institutional investors – to access bitcoin trading. These organisations have been prevented from buying BTC in the past due to the requirement of storing the crypto, and the risks that come with that.
While the conversation around the ETF has gone cold, Bakkt appeared out of nowhere towards the end of the year and has garnered plenty of interest. It was due to launch a fortnight ago, but that date had to be pushed – for good reasons, was the implication from Bakkt’s Twitter account on 20 November. ‘Given the volume of interest in Bakkt and work required to get all of the pieces in place, we will now be targeting January 24, 2019 for our launch to ensure that our participants are ready to trade on Day 1’.
And in this update from 27 November, Bakkt confirms: ‘We expect the contract to launch on January 24, 2019, subject to regulatory approval. We’ll continue to update you on our progress and milestones.’
The distinctive feature of Bakkt, for those who are still uncertain, is that their futures are ‘physically settled’, meaning that the orders are passed through to the underlying market. Buying a 1 BTC futures contract with Bakkt means 1 BTC of real demand, whereas other futures products are just ‘paper’ contracts that do not intrinsically impact the market in the same way.
However, Bakkt’s expected launch date of 24 January might need to be delayed. The government shutdown in the US may impact it, and according to the latest reports, Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, has not yet received approval from the U.S. Commodity Futures Trading Commission (CFTC). This delay, along with the shutdown, means that Bakkt may well miss its 24 January date.
This isn’t a disaster, though, and the delay may only be a few days. Crypto bulls should also factor in the way the launch of Bakkt is likely to impact the market. The narrative has been, among the perma-bulls at least, that Bakkt will almost immediately bring a flood of institutional money and BTC will duly skyrocket. But this isn’t how markets tend to work. We’re in the midst of either a bear market or the earliest stages of a fragile recovery, depending on how you read it, and the truth will only be known for sure in hindsight. We need time for the market to make a decision, either to bottom properly or consolidate and show strength from here. Then confidence will return and larger investors are more likely to be willing to dip their toe in the water.
Ironically, delaying Bakkt into February might possibly give the market time to play out this stage.
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