Bakkt's ambition and dilemma

After several twists and turns, Bakkt, a bitcoin futures exchange launched by the New York Stock Exchange parent company ICE Intercontinental Exchange, finally began testing and finalizing the online time, which is expected to go online within 2-3 months.

As an attempt by the world's top financial institutions to test water cryptocurrency, Bakkt carries ICE's huge expectations, namely, the preemption, card cryptocurrency trading, the emerging financial market, and even the cryptocurrency payment business to create a closed-loop ecology, consolidate ICE as a The status of the world's top exchanges and clearing settlement networks.

At the end of July this year, the Bitcoin futures trading platform Bakkt officially began testing, which once again caused great concern in the entire cryptocurrency industry.

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The most striking aspect of Bakkt is that its main sponsor is the ICE Intercontinental Exchange, the parent company of the New York Stock Exchange. As the world's second-largest regulated exchange and clearing house operating network, ICE also owns 14 securities and futures exchanges within the Canadian Futures Exchange, the Paris Stock Exchange, the London International Financial Futures Exchange, and 5 settlements. It is a giant in the traditional financial trading industry.

At the same time, Bakkt also received a first round of financing of $182.5 million in early 19th. Investment institutions include Li Ka-shing's Victoria Harbour investment, Microsoft's (MSFT.US) venture capital department M12, Boston Consulting Group, CMT Digital, Eagle Seven and Tencent South Africa. Shareholders Naspers et al.

Such a strong background makes Bakkt's launch an extraordinary meaning, which means that the international mainstream financial community has taken an important step in the cryptocurrency business and is considered to be highly likely to attract more investors and funds into cryptocurrency. The industry is pushing the price of mainstream cryptocurrencies such as Bitcoin.

Bibox Vice President Xiang Dan believes that Bakkt has four positive effects on the industry, which greatly extends the boundaries of the cryptocurrency market; the entry of professional investment institutions and personnel will make the whole industry tend to be standardized and mature; large-scale funds And professional people can make the quality of high-quality blockchain projects get reasonable economic value; promote the further improvement and implementation of regulatory measures and strategies, and make the whole industry develop more orderly.

But before Bakkt really came out, these inferences could only stay in the hypothesis stage, and there were many uncertainties. In fact, it is not uncommon for traditional financial exchanges to develop bitcoin futures business. As early as the end of 17th, the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) have successively launched bitcoin futures contracts, which are in fact ICE's competitors.

The reason why traditional financial institutions love bitcoin futures trading rather than spot trading is mainly because of compliance and market space considerations. Spot transactions often involve multiple risks such as asset theft, money laundering, and terrorist financing, which brings many unnecessary troubles, and the US regulatory authorities have not yet developed fully applicable access and enforcement regulations, so the mainstream financial institutions are not mature. It will not be easy to get involved in the situation.

In contrast, existing bitcoin futures trading generally does not involve spot, security and controllability are higher, so bitcoin futures trading is within the scope of the US Commodity Futures Trading Commission (CFTC). "Moreover, the market space for futures business is more than 10 times that of the spot, and it is not affected by the bulls and bears, which is why the competition in the futures market in the digital currency trading field is becoming more and more intense," said Xiang Dan.

After nearly two years of practice, the business of the two exchanges mentioned above is both happy and sad. According to related reports, due to the low transaction volume, CBOE's Bitcoin futures trading platform has announced the suspension of the new contract at the beginning of this year to re-examine how to enter this field. However, the data on the bitcoin futures trading platform launched by the CME platform is very eye-catching. Since its establishment in July this year, it has traded more than 2 million contracts, equivalent to more than 10 million bitcoins, and the transaction volume continues to rise. The monthly average daily trading volume exceeds 13,600 contracts, and this transaction volume also brings a very substantial income to CME.

CME and CBOE exchanges this year, bitcoin futures contract trading volume data source: tradeblock

The entry of the ICE Intercontinental Exchange may be stimulated and tempted by the performance of the CME Bitcoin futures trading platform to a certain extent, and also to avoid serious dislocation in the emerging financial sector.

However, compared with the former two, only the cash-settled bitcoin futures, that is, the two parties only need to conduct futures trading within the agreed time according to their respective price forecasts, without having to purchase BTC physical assets, the exchange only needs to be after the contract expires. According to the difference between the real-time market price and the previous buyer's position, cash delivery can be made on both accounts, but Bakkt takes a big step in the form of futures settlement, that is, bitcoin contract settlement can support physical settlement.

This means that Bakkt needs to deliver real bitcoin to the customer at the time of contract delivery, which means that the exchange needs to purchase and store a considerable amount of bitcoin in advance. Considering the current trading volume of Bitcoin futures exchanges, Bakkt's physical delivery mechanism will bring considerable purchase demand to the secondary market, which will improve the market supply and demand relationship and drive up the market.

However, it is not easy to implement this mechanism. Bakkt was originally launched as early as December 18, but due to the delay in obtaining regulatory approval from the CFTC, it has postponed several online launches, mainly due to the complexity of physical delivery mechanisms and compliance requirements. strict.

It is understood that futures transactions in physical delivery generally involve three parts, namely, custody, transaction, and liquidation. According to relevant US regulatory requirements, enterprises with DCO licenses can conduct custody business, and enterprises with DCM licenses can conduct liquidation business. But Bakkt itself has neither a DCO license nor a DCM license. Although it acquired its license for 18 years through the acquisition of DCC, a digital asset trust company with a DCO license, the most important DCM licenses have not been obtained.

At the same time, the futures trading platforms LedgerX and ErisX both announced that they have obtained the access permit of the US Commodity and Futures Trading Commission (CFTC), and both settled in bitcoin physical delivery, and the other platform Seed CX received the New York Financial Services Department license license BitLicense Among them, LedgerX is likely to become the first bitcoin futures contract platform in the real sense of physical delivery. Bakkt, the original high-profile promoter of Bitcoin futures for physical settlement, has now completely lost its first-mover advantage and is facing increasing competitive pressure.

Bakkt also tried the Seed CX in general and applied for a license license to the New York Financial Services Department to become a legitimate digital asset custodian. To this end, Bakkt launched its own delivery warehouse, but as of now, it has not yet obtained the license. However, from the information that Bakkt is about to go online at the end of September, Bakkt is expected to solve the license issue within two months.

It is also worth noting that the previous settlement date of CME (CME Group) bitcoin futures contract will be accompanied by the decline of bitcoin price in most cases, and is called the “delivery date effect” of bitcoin futures. It is understood that this is mainly because the futures contract price is based on the bitcoin spot price, the shorts hope to get BTC at a lower price, while the bulls hope to sell BTC at a higher price, so the game will be The price fluctuations on the day of delivery will be severe, and once the balance is broken, there will be a unilateral market.

After Bakkt officially launched, attracting more investors with large funds to join the settlement date game may bring more violent market fluctuations, but considering that Bakkt needs investors to use Bitcoin stock for physical delivery, this can also To a certain extent, curb speculation. Until the value of Bitcoin is truly recognized by most investors, rather than the more compelling nature of its speculative nature, such a phenomenon can be fundamentally mitigated.

However, considering the limitations of Bakkt and other compliant futures exchanges, their impact on Bitcoin, OKex and other native Bitcoin futures trading platforms will be limited. The former target customers are more mainstream financial system investors, which is also a A larger emerging market; the latter is richer in gameplay and more speculative in nature, and the target customers are still dominated by existing investors in the cryptocurrency industry.

At the same time, the impact of Bakkt as an individual on the entire industry may not be overestimated. After all, there have been many futures exchanges in Chicago, and there are also various futures exchanges such as LedgerX to compete. The symbolic meaning of Bakkt may be More substantial than the substance, but the impact of this batch of transactions may exceed the expectations of the majority.

Of course, Bakkt's goal is not just to trade in futures. It even tries to act on spot trading, cryptocurrency payments, and close the loop from trading to payment. According to public information, Bakkt will use Microsoft's cloud solution to create an open and regulated global ecosystem for digital assets, enabling consumers and institutions to seamlessly purchase, sell, store and use digital assets among its first partners. It includes well-known companies such as Microsoft, Starbucks, and Boston Consulting.

At present, there are already Bitpay, Coinbase and other players in the field of cryptocurrency payment, and mainly promoted and applied in small and medium-sized websites involving cross-border payment scenarios. Bakkt Display hopes to break through the mainstream retailers and offline payment fields with the endorsement of the giants behind them. It is ambitious to increase the cryptocurrency and its own usage in the daily life of the public .

If Bakkt does not "put the pigeons again", it is still about 1-2 months since the official launch of Bakkt. At that time, the high probability will have a positive impact on the short-term performance of the secondary market of cryptocurrency, but it will really attract "Old Money". Entering the market is still unknown. As we enter the new cryptocurrency market, the extent to which ICE Intercontinental Exchange's past achievements and experience can be replicated, we will wait and see.

Author: Hu Tao

Source: Chain Catcher

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