Pending Approval: Bakkt’s Futures Contract Is Set to Be Launched
Bakkt‘s Bitcoin (USD) Daily Futures Contract, the physically-settled daily futures contract, is quite close to getting the green light from the authorities, according to reports on the Wall Street Journal (WSJ). The exchange has been working with the Commodity Futures Trading Commission (CFTC) to ensure its business plan is compliant with the agency’s regulatory framework. A couple of areas that stood out are the exemptions for the exchange to keep customer’s bitcoins, cybersecurity issues that could crop up and the financial liability, in the event of a hack. Once the CFTC decides to approve the project, the public has 30 days to weigh in with comments.
Bakkt was developed by Intercontinental Exchange, the parent company of the New York Stock Exchange (NYSE), as a regulated trading platform for cryptocurrencies, where retail and institutional investors can invest in products that are compliant with regulators in the U.S. Bakkt’s first product is a futures contract that is poised to increase the liquidity of Bitcoin.
The Contract was expected to launch on December 12, before it was rescheduled for January 24, 2019. At the time, Bakkt CEO Kelly Loeffler had cited the interest and the “work required to get all the pieces in place” as reasons for the delay.
ICE Futures U.S., Inc. will list the new Bakkt Bitcoin (USD) Daily Futures Contract for trading on trade date Thursday, January 24, 2019, subject to regulatory approval. The new listing timeframe will provide additional time for the customer and clearing member onboarding prior to the start of trading and warehousing of the new contract.
Seen as a game changer for the crypto sector, Bakkt’s futures are expected to provide the platform for increased participation from Wall Street. Bakkt will physically deliver Bitcoin to investors of the futures contract on Bakkt, which will impact the supply and price of bitcoin.
Recognized crypto trader Alex Krüger went as far as saying that, when it launches, Bakkt’s futures, will lead a bull run for Bitcoin to the first quarter of 2019. While the approval of Bakkt’s contract would lead to growth for the market, the disapproval of VanEck’s bitcoin exchange-traded fund could crash prices.
“Possible outlook for BTC: First, the bull run on BAAKT & renewed ETF approval narrative early 2019. Second, ETF denied Feb/27, massive crash, goodbye 6k, hello 4k, cleanse all weak hands Lastly, having 2020 narrative and re-adjustments lead to a sustained bull run for the rest of 2019 & 2020.”
While Krüger is optimistic about the impact of Bakkt, others like securities attorney Jake Chervinsky believes the market could be overestimating the potential of Bakkt’s futures.
“In the minds of many, Bakkt’s launch has become a full-fledged narrative for when & how the bear market will end. It plays the same role as bitcoin ETFs as a trusted vehicle to bring that sweet institutional money into the space, but without all the trouble of SEC approval,” Chervinsky said.
However, while Bakkt seems to have everything under control regarding the launch of its futures contract (Phase 1), his primary worry is on the adoption of cryptocurrencies by major merchants like Starbucks and Microsoft (Phase 2), which “Bakkt hasn’t said what it is or when it’s coming.”For Loeffler, regulation comes first before merchant adoption. She told the WSJ:
Once digital assets have more trust and regulation, people will be more comfortable using digital assets as currency.
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