Big news today shows Bakkt is extremely close to actual operations, with testing of new Bitcoin futures contracts on the market starting this week.
A daily and a monthly contract will be the initial types of futures contracts that will clear through the InterContinental Exchange (ICE) manage by Jeff Sprecher.
“The company plans to offer U.S. traders access to physically-settled bitcoin futures contracts, which differ from the cash-settled futures contracts that Chicago exchanges CME and Cboe offered starting at the end of 2017,” writes Nikhilish De at CoinDesk. “With cash-settled contracts, traders receive the cash equivalent to the contract’s value when it expires, while with a physically-settled contract they receive the actual underlying commodity – in this case, bitcoin. Bakkt hopes to draw fresh institutional funding to the bitcoin ecosystem with its regulated product, which may attract investors wary of the broader market.”
For months, we’ve been hearing about Bakkt without actually seeing a lot of moves forward. Part of what leaders have always been waiting on is regulatory approval as CFTC and SEC continue to look at relevant frameworks for these types of Bitcoin futures.
If we do see Bakkt go into effect soon, what will the market look like?
Ali Shiekh at Master the Crypto has some ideas.
Going over historic introduction of futures for precious metals, Shiekh extrapolates some of what might happen to Bitcoin as Bakkt increases the choices that traders have for futures trading.
“So looking back at the long-term view historically for gold, silver, platinum — we see that adding futures for each asset had little or barely any impact on price compared to political, international, and economic events; in fact, these other events were the reasons for major price fluctuations,” Skeikh writes.
Essentially, what Sheikh is saying squares with what a lot of traders already know – that institutional buy-in and government responses are going to matter a lot more than precisely what kinds of futures contract are available. Still, Bakkt will offer new options for traders and that will get some investors more excited about participation. Also, Sheikh, like many other analysts, is not ruling out some short term volatility around changes to the BTC market.
“Sure, (futures introductions) may initially cause Bitcoin to move up or down,” he writes, “but in reality, Bitcoin’s price is going to be more dependent on events in the Bitcoin economy.”
Currently, that BTC economy has Bitcoin down under $10K, hovering around $9950, but that’s still a lot higher than annual averages. Traders are still bullish about the future of BTC as Bakkt gets serious about BTC futures.
