Intercontinental Exchange announced that its crypto exchange, Bakkt, will make its debut on December 12th. Bakkt’s first product will be a physical bitcoin daily futures contract that will begin trading on opening day.
Intercontinental Exchange is the parent company of the New York Stock Exchange, which has the largest market capitalization of any stock market in the world. ICE built Bakkt on top of its pre-existing infrastructure to meet the demands of institutional and retail investors alike.
Bitcoin Futures With a Twist
Bitcoin futures isn’t a groundbreaking product. The Chicago Board Options Exchange and CME Group already offer bitcoin futures contracts on a weekly and monthly basis. What makes Bakkt’s bitcoin futures radically different from its predecessors? The difference is Bakkt’s bitcoin futures contracts will be settled daily, and more importantly, will be physical bitcoin.
CME and CBOE bitcoin futures settle in fiat rather than bitcoin. This method exposes traders to bitcoins volatility without ever buying the digital asset. The downside of this method is that traders affect the price of bitcoin without ever having to hold it or take it or take it out of circulation. Physical bitcoin means that Bakkt will have to buy and sell actual bitcoin. This has many implications for the cryptocurrency market because Bakkt will need to purchase large quantities of bitcoin from an already dwindling supply.
Bitcoin’s Altered Landscape
Bitcoin has had an incredible journey in the last nine years. It’s undergone a multitude of transformations from the go-to currency of the dark web to a product offered by one of the largest financial institutions in the world. Bitcoin’s rise to the top of emerging assets has the digital currency in the spotlight of regulators and speculators alike.
Crypto exchange security and wallet vulnerability have kept many investors and consumers away from bitcoin. In the last eight years, 31 exchanges have been hacked for over $1 billion, and this isn’t including the vast amounts of cryptocurrency that has been stolen or lost from individual wallets.
Bakkt will store bitcoin in a digital warehouse that boasts enterprise-grade security explicitly created for digital assets. Not only will it house bitcoin in state-of-the-art digital vaults, but it will also leverage its tried and true clearinghouse to settle trades. This is in stark contrast to how the majority of exchanges have operated.
Joining the Bandwagon
Bakkt isn’t the only crypto exchange that is making its debut this year. Investment giant Fidelity announced in a press release that it launched its cryptocurrency investment platform on October 15th. This has bolstered investor confidence because of both Fidelity and ICE and trusted names, and have the experience of what it takes to run a fully regulated operation.