The much anticipated regulated bitcoin settled futures offered by NYSE’s parent company have launched today.
The reaction has been one full of memes, in particular of empty warehouses with one such meme so serving as our featured image above.
That’s because people apparently expected hundreds of millions worth of bitcoin to be traded on the first day of launch.
The current 38 BTC, worth some $370,000, is apparently not good enough. Leading to some reactions like: in before maxis shout bitcoin no needs bakkty.
The daily futures contract seems to not be attracting much volume at all. The monthly one has just begun, so a slow start should have perhaps always been expected.
That’s because unlike CME’s fiat bitcoin futures where transactions can be reversed if anything goes wrong, these are actual bitcoins.
We’re sure Bakkt has taken considerable measures to implement the futures in a fully secure manner, with it having insurance too, but still as a new thing rationally you start off with small amounts.
When CME futures launched, for example, they too didn’t start off at half a billion a day at times. It was about a million or less.
So jokes are nice and all, but it’s not very clear what anyone expected. That’s especially in a week where CME’s futures are to expire.
Nor is it very clear why anyone might have expected an instant price jump. That proposes institutional investors are starved from options even as Coinbase claims some 60% of their volumes are institutional investors.
As perhaps the only crypto exchange that has the distinguishment of never having been hacked (at least as far as it’s publicly known), we did once asked a Bakkt representative what they offer above Coinbase.
As usually is the case when something has much attention, people don’t necessarily feel the need to answer probing questions.
Now that this is out, however, Bakkt will have to realize they’re in a competitive environment, and thus presumably will have to make a case for themselves.
That’s for the daily futures contract. The monthly one is unique in being bitcoin settled, professional and regulated.
Without that last one, such bitcoin settled futures have existed since 2013. Some have even been professional, but not really to the standard a respectable company might expect.
That includes things like hedge funds, who perhaps don’t have many options to hedge with actual bitcoins. It can include OTC desks, crypto service providers focusing on international payments, big companies who maybe want to accept bitcoin payments, brokers who maybe want to provide the option of buying and selling bitcoin, and so on.
It is unlikely to include institutional investors, however, like pension funds. At least not to a greater degree than they can already include themselves as they usually just buy and hold, but are limited by law to doing so with only 10% of their holdings, a 10% that has to be shared with gold and so on.
An ETF can remove that restriction. Bakkt can’t, at least not directly. Indirectly, Bakkt can provide a very strong argument against SEC’s chair claim that bitcoin doesn’t have enough “proper” exchanges.
So Bakkt is arguably not an opening of the gates, but more of an incremental increase in market access and an increase in the sophistication of bitcoin traded options.
It is also a step towards the legitimizing of bitcoin in the eyes of old stuffy directors and executives who may feel more comfortable offering bitcoin services if their gateway in and out is an NYSE level exchange.
Making this an important step for bitcoin and cryptos in general as new infrastructure is being laid out to address the cracks that showed up in late 2017 when the then infrastructure could not keep up with demand.
That surge in demand, leading to the infrastructure being unable to keep up, leading to a crash, leading to new infrastructure to accommodate the surge in demand that repeats the cycle, has been one prominent bitcoin story since at least 2011.
So Bakkt might initially appear as just too much hype, and that hype may lead to kids being disappointed, but those that take a moment to think may well consider something like Bakkt as pretty much vital for bitcoin’s continued maturity and growth.
For if crypto’s infrastructure is to not crumble under pressure at a $1 trillion market cap, as it did when it nearly reached it two years ago, then an increase in market access is probably necessary.
An increase which naturally won’t be felt instantly, but as time goes on it all perhaps adds up to a transformed and a far more professional market.