Bakkt is on everyone’s lips this month. Believe me, you would not be the only one to think it’s a character from Star Wars. Today, we take a closer look at Bakkt and then you will agree that it is simply out of this world!
What is Bakkt in layman’s terms?
Bakkt is a platform that is built on the Intercontinental Exchange (ICE) network. ICE is a global exchange operator whose parent company is the New York Stock Exchange (NYSE).
Bakkt will be used for trading, storing and spending your digital assets. When Bakkt is released (12 December 2018), investors can buy Bitcoin Futures contracts. It is interesting to note that the platform will not support margin trading when it comes to Bitcoin contracts. This way, the product will uphold a higher market integrity and give way to the “trusted price formation” that will advance the many promises of digital currencies. It is a secure global platform that will make it easier, cheaper and quicker to use digital currencies. At the same time, it will comply with applicable regulatory requirements.
How does it work?
As previously stated, Bakkt is a market for Bitcoin that is federally regulated. ICE will be partnering with various industry leaders such as Starbucks, Boston Consulting Group and Microsoft. Bakkt will be ideal for Bitcoin mutual funds, ETFs and pension funds, in other words for mainstream investments. In the near future, the product will also be looking at how Bitcoin could potentially replace credit cards. This will be done by means of Bitcoin apps.
The word “Bakkt” is derived from “asset-backed securities”. It means unlocking a trusted investment. The idea is to make the Bitcoin market more stable and present a suitable investment alternative to stocks and bonds.
ICE is the second largest owner of financial exchanges by revenue in the world. In 2017, ICE’s revenue was $4.6 billion and delivers annual returns of 24.1%.
What is Bitcoin Futures?
Bitcoin Futures is basically a way of speculating what the price of Bitcoin will be at a certain time in the future. You buy a contract that is based on Bitcoin’s price and the speculators bet what they think the price of Bitcoin will be at a given time. So, you don’t actually have to own Bitcoin to have a Bitcoin Futures contract. These contracts can be traded on exchanges that are regulated as to reduce risks associated with the industry. Even if you reside in a country where Bitcoin is banned, having a Bitcoin Futures contract is ideal. Reason being, you technically don’t own any Bitcoin.
Will it bring mainstream acceptance?
The crypto community is divided in this regard. Some are of the opinion that it will bring mainstream acceptance or adoption whilst others say it won’t. Bitmart Senior Trade Analyst, Rudner de Witt says Bakkt will be good for the industry.
“I believe that Bakkt will be good for mainstream adoption and the crypto industry overall. Bakkt will give institutional investors the confidence to putt heir hedge funds into this product since it is fully insured and liquid. With liquid I mean, they will physically own Bitcoin.”
He believes big institutions will buy into cryptos.
“People with bonds will look at Bitcoin in a different light and invest. The bonds market is currently valued at around $100 trillion. If only 1% of that market invest in cryptos, we will see the crypto market cap increase to $1 trillion. This is a five-time increase in the current market cap! Bakkt is an ETF without an ETF approval. It is widely trusted,” said De Witt.