For a long time, the bitcoin community has been predicting that the entry of institutional investors into the bitcoin market will spur a bull run. Mike Novogratz, in particular, recently said that investors are “making sure their ducks are lined up” and their entry into the market will boost the price of BTC.
This is where Bakkt comes in. The Bakkt futures are a sure gateway to bitcoin’s success in the near-term fuelled by an increase in institutional investors.
Official trading of BTC physically-delivered futures commences on September 23 but starting from Sept 6, users will be able to store their bitcoin holdings in the Bakkt warehouse. Bakkt, a subsidiary of Intercontinental Exchange (ICE), received regulatory approval on August 16 to launch its eagerly-anticipated same-day bitcoin futures and monthly futures contracts.
This announcement was met by a price surge to over $10,700 with gains of $1000 within a few hours. Following this rally that was witnessed, investors are now positive that when the Bakkt futures finally get off the ground, a breakout will likely ensue.
Reasons Why Bakkt Launch Of BTC Futures Could Stir A Bull Run
Entry of Bakkt into the bitcoin futures contracts market is bullish for bitcoin because of these 3 reasons: Bakkt’s bitcoin futures will be physically settled contrary to cash-settlements, institutional investors will be able to buy bitcoin in a fully regulated and secure fashion, Intercontinental Exchange (ICE) is the parent company of the New York Stock Exchange (NYSE), which is undeniably a success in the stock exchange market.
First, Bakkt’s Futures will be physically settled. Presently, futures contracts are settled with cash on the expiration of the futures, case in point, Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (Cboe). These cash-settled futures barely affect the bitcoin market. Bakkt will be the first firm to offer physically-settled bitcoin futures. In simple terms, traders will receive actual bitcoin instead of a cash equivalent upon the expiration of contracts.
There is a good reason to believe Bakkt futures will catalyze a bull run because Bakkt will be required to hold bitcoin in the Bakkt warehouse to facilitate physical settlement. This will mean less bitcoin will be flowing in the market and this could be a real shot in the arm for the price of bitcoin. Also, the physical holding of bitcoin will foster widespread adoption of bitcoin.
Secondly, Bakkt will offer a regulatory-compliant platform for traders. Bakkt received the green light from the New York Department of Financial Services (NYDFS) as well as from the U.S. Commodity Futures Trading Commission (CFTC). This implies that all trades of bitcoin futures on the platform will be permitted by law. Additionally, Bitcoin will be stored in the Bakkt Warehouse, a third-party qualified custodian. This offers some trust to investors because, in the past, cryptocurrency exchanges have fallen prey to malicious hacks and outages leading to huge losses.
In short, any regulatory concerns that investors might have regarding the futures offering have been dealt with by Bakkt in its quest to launch a professional-looking product.
Finally, despite the fact that Bakkt is a young company launched in 2018, the probability of success of its bitcoin futures is very high because it’s operated by Intercontinental Exchange (ICE) which has effectively managed New York Stock Exchange (NYSE). NYSE is now the largest stock exchange in the world with an equity market cap of over $22 trillion. In addition, ICE is backed by behemoth companies like Microsoft Inc. and Starbucks and this will provide investors with a layer of assurance and optimism in Bakkt’s new offering.
Scott Melker, crypto analyst and trader opined earlier in August that Bakkt’s bitcoin futures will appeal to institutional investors and this will push the prices of the king coin in the long-term.
RhythmTrader echoed the same sentiments. This analyst believes Bakkt will spawn cryptocurrency adoption and also bring liquidity for bitcoin.
“Remember, the hype is Bakkt with substance. Unlike other futures exchanges, this is settled in bitcoin. Actual bitcoin is paid out, not just the fiat equivalent to the price of bitcoin.
The result is better price discovery and liquidity for bitcoin and everyone in the space,” stated RhythmTrader.
However, some believe Bakkt’s bitcoin futures will not influence the price of bitcoin, take Kyle Asman, for instance. Asman is a partner at BX3 Capital, a business advisory service provider and he believes that institutional investors interested in trading bitcoin are already doing so and the ones that are not trading yet will not do so until clear regulations are stipulated.
The bottom line is the announcement of Bakkt bitcoin futures was bullish for bitcoin. It’s, therefore, a no-brainer that the price of bitcoin will soar once official trading on Bakkt kicks off, maybe even hitting a new ATH.