Steven ZeniosWhat is Bakkt
Bakkt is a regulated digital asset ecosystem designed for institutional market participants. One of its main services offered are physically delivered daily and monthly Bitcoin Futures contracts combined with warehouse storage for safekeeping of digital assets. Cold and hot wallets stored in the warehouse are protected by a $125,000,000 insurance policy.
Bakkt was founded in 2018 by the Intercontinental Exchange (ICE), a parent company of the New York Stock Exchange. Its aim is to provide an alternative investment option for hedge funds, pension funds and asset managers and a secure platform for institutional investors to trade Bitcoin. Bakkt already established partnerships with companies such as BCG, Microsoft and Starbucks and is in talks with other popular brands. Building a high trading volume in futures contracts will help stabilize the current volatile Bitcoin price and thus make it a more appealing and secure investment opportunity.
Disappointing launch
Bakkt’s anticipated launch on the 23rd of September failed to meet expectations registering a slow start. Numbers were particularly low on the daily Bitcoin futures contract which is considered as the platform’s flagship. Crypto analysts and traders had dividing opinions regarding Bakkt’s low volume. Some were quick to judge it as a failure while others supported that it was too soon to tell, as adoption takes time. Alex Kruger in one of his latest tweets compared Bakkt’s first-day volume to CME’s Bitcoin futures contracts launch.
He tweeted:
Bakkt, first day volumes: 71 bitcoin.
CME, first day volumes: 5298 bitcoin.
That's a 75x difference.
— Alex Krüger (@krugermacro) September 24, 2019
“Bakkt, first-day volumes: 71 bitcoin. CME, first-day volumes: 5298 bitcoin. That’s a 75x difference.”
The difference in volumes is broad but it should be noted that there is an important distinction between the two products. CME’s contracts are settled in fiat and Bakkt’s in Bitcoin. Institutional investors that want to trade on Bakkt would have to obtain permission to possess cryptocurrencies and thus they would need some time to arrange all the legalities.
Bitcoin Price drop
Crypto investors were bullish, expecting the Bitcoin price to surge with the launch of Bakkt due to the new institutional investors that were expected to enter the market. However, BTC suffered great losses and plummeted from $9,500 to slightly below $8,000. The past two days it has been ranging between $8,200 and $7,800.
Having the BTC price drop right after the disappointing trading volume on Bakkt’s launch had many correlating the two events.
Possible triggers
Although the slow Bakkt performance could have contributed to the negative trend, it is highly unlikely that this event alone could have resulted in a sudden 15% Bitcoin price dip.
For the past two months, Bitcoin had been forming a descending triangle and 70% of the times these triangles tend to break towards the downside.
There are other theories about what could have caused the steep downturn on the Bitcoin price such as president Trump’s impeachment, the temporary hash rate drop and the upcoming CME futures contracts’ closing. Statistically, 75% of the days prior to CME futures contracts’ settlement, have been negative for the Bitcoin price. Cash settled Bitcoin futures contracts are relatively easy for institutional traders to manipulate without ever owning any BTC.
