The first bitcoin futures block trade is released, will Bakkt's fate turn around?

According to Coindesk's October 5 report, cryptocurrency investment fund Galaxy Digital and off-exchange (OTC) trading company XBTO conducted the first bitcoin futures contract deal on the Bakkt platform.

Screen Shot 2019-10-05 at 6.22.05 PM (Source: visualhunt )

On Friday, Bakkt's parent company, the Intercontinental Exchange (ICE), announced the deal, but did not further disclose the size of the deal. A block trade is a privately arranged futures or options trade that can be executed separately from the open market, with the aim of avoiding excessive fluctuations in the trade price. According to the Chicago Mercantile Exchange, block trades are usually executed by large companies and institutions.

The above transaction took place on Tuesday. Prior to this, the high-profile Bakkt's performance in the first week of the launch was disappointing, with a weekly trading volume of only $5 million.

Bakkt, which has been brewing for two years, is the first bitcoin futures market in the United States to be physically delivered. Although Bakkt's debut was unsuccessful, Galaxy Digital and XBTO expressed confidence in the platform.

At a press conference on the Intercontinental Exchange, Galaxy Digital said:

As digital asset classes continue to mature, we see Bakkt as an important component of the cryptocurrency market infrastructure.

At the same time, the XBTO issued a statement saying that in addition to participating in the big deal of Bakkt, it also bought the first bitcoin daily futures last week:

Last week, we purchased the first Bakkt Bitcoin daily futures contract and conducted the physical delivery of the first digital asset in accordance with existing laws and regulations. This week, we made the first block trade. We are pleased to report to you that the launch of Bakkt is successful and it can accommodate large transactions.

Bakkt's Bitcoin futures contract has been closely watched by cryptocurrency investors and the financial industry as a whole. Industry insiders believe that the contract may attract institutional fund managers such as hedge funds, pension funds and endowment funds.

Galaxy Digital was led by former Goldman Sachs executive Mike Novogratz, who later helped run the hedge fund Fortune Investment Group. XBTO's chief executive is Philippe Bekhazi, who worked for Citibank and Cohen's SAC Capital hedge fund.

The Intercontinental Exchange’s press release issued this Friday did not say whether the block trade involved Bakkt’s monthly or daily contract.

Bakkt's performance in the first two weeks is disappointing

After spending more than a year ensuring full compliance with US authorities' regulations, Bakkt went live on September 23. In the first 24 hours, the platform traded a total of 71 bitcoin futures contracts.

Since the launch, the platform's trading is mainly a monthly contract, and its performance is disappointing. In the first four days of the week, Bakkt's monthly futures contract had only 260 changes, which was calculated at Thursday's closing price of $8,152 per bit, and the transaction value was only about $2.1 million. Although Bakkt did not give the relevant transaction data for this Friday, the trading volume this week has decreased from the 623 contracts last week. On Tuesday, when the above-mentioned transaction occurred, about 27 monthly contracts changed hands, and the value was only 226,584 US dollars based on the closing price of the day.

The reason why Bakkt is said to be underperforming is that the price of Bitcoin has been fluctuating in the range, so institutional traders are not eager to open positions. There are also some market analysts who believe that this has a certain relationship with the recent slow decline in bitcoin prices, which indicates that institutional investors have insufficient demand for the product. At present, most individual investors are more inclined to trade futures on the Chicago Mercantile Exchange, which was launched at the end of 2017.

Mati Greenspan, senior market analyst at eToro, a digital asset trading platform, believes that:

In my opinion, the disappointing performance of Bakkt after going online seems to be the catalyst for the bitcoin plunge.

At the time of writing, the price of Bitcoin was about $8,100, a sharp drop from the $10,000 before the launch of the Bakkt contract on September 23.