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Bakkt accepts the challenge to arise when working with physically delivered BTC Futures
Bakkt's CEO Kelly Loeffler shared a blog post on Medium to announce the news they will launch on top of ICE Futures U.S., on Sept. 23. Which begs the question: are they going to be the first end-to-end regulated cryptocurrency exchange offering physically delivered Bitcoin futures in the niche?
From the very beginning, the team behind Bakkt was planning to encourage the participation of banks, insurance companies, pension, hedge and mutual funds in Bitcoin. But regulation, the asset price that varies from platform to platform, manipulative and fraudulent trading, no AML/KYC standards applied, no collateral to cover counterparty risks, security breaches were a serious obstacle on the way.
Now, the firm is all set to launch their physically delivered Bitcoin futures in September because they have addressed all of those uncertainties and received regulatory approval needed.
In a conversation with TradeSanta, Sven Hildebrandt, a partner at DLC Distributed Ledger Consulting GmbH said that more regulation Bakkt offers sets the ground for institutional investors.
"I believe that Bakkt is well-positioned to tackle the challenges that arise when working with a new asset class like digital assets, applying the "old world" rules to the new kid on the block,'' he commented.
How are Bakkt's Bitcoin futures contracts different?
Bakkt's Bitcoin futures contracts are new in a way that when the contract expires, the customers will be given the actual cryptocurrency instead of a cash payment. Prior to that, exchanges had offered fiat only.
According to Hildebrandt, the value of this proposal is somewhat similar to that of gold. "When you buy gold futures and they are not delivered in physical gold but USD, it imposes the currency risk."
Hildebrandt also added that people "secure" USD by buying gold, "that's why you want a physical, and in the case with Bitcoin, digital asset".
Bakkt will list two types of futures contracts. A daily settlement Bitcoin futures, which will enable customers to transact in a same-day market. And a monthly Bitcoin futures contract that will enable trading in the front month and across the forward pricing curve.
Because those futures are different in a way that Bitcoin needs to be stored somewhere, the Bakkt team has created the Bakkt Warehouse.
It's a physical arsenal with units distributed all over the world. The Warehouse will be comprised of both, online and air-gapped digital storage. According to their website, Bakkt systems algorithmically balance between both warm and cold storage tiers to minimize risks associated with warm storage.
Bakkt's competition
Bakkt is not the only business to fight for the right to launch their own physically delivered Bitcoin futures. LedgerX and TD Ameritrade-backed ErisX compete for the niche, too, but still haven't finalized the process.
Does ir mean that Bakkt, with their $182.5 million raised from backers including Microsoft, win the race for the first-mover advantage and the right to educate regulators in better understanding of the niche?
Looks like so.
Miklos Denkler, a founder of the Corion Stablecoin Foundation, said in an interview with TradeSanta that institutions don't want to be the first to experience a disruptive "exotic" asset, but would rather wait for the regulated, trustworthy, easy-to-buy and safe custodian storing service like provided by Bakkt.
About the author
Julia Gerstein, a crypto trading bots enthusiast and a content writer at TradeSanta.
Disclaimer
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