Bakkt’s Bitcoin Futures Disappointing First Week (Compared to CME)

ICE’s Bitcoin futures trading platform, Bakkt, launched a few days ago. This was one of the most anticipated events of 2019 as it was supposed to open the way for institutional money into the market. However, looking at the first week of trading, we can see that the volume on the platform has been nothing but disappointing. This is even more evident when compared to CME Group’s Bitcoin futures contracts which continue to dwarf its volume. 

Bakkt’s Minimum Volume

According to Bakkt’s official website, during the first week of trading, the platform saw a total of 165 contracts purchased. The monthly future contract is sized up to 1 Bitcoin, meaning that the cash equivalent of the volume is roughly around $1.5 million based on Bitcoin’s average price throughout the week. 

This is definitely disappointing, especially if we consider the hype that was created before the launch and how people thought that Bakkt would essentially open up the market to institutional cash flow. 

Unfortunately, for now, this doesn’t seem to be the case. At the same time, CME Group’s bitcoin futures contracts continue to dwarf Bakkt in volume. On September 27th alone there were 4099 contracts, each sized up to 5 bitcoins, which is substantially more compared to Bakkt’s volume. This number was even higher a few days ago on September 24th when upwards of 14,300 contracts were purchased. 

CME Group BTC Futures Volume. Source: cmegroup.com

What this goes to say is that it’s perhaps unwise to hype up events prior to their happening and to put faith into something without seeing its actual implications on the market. 

Silver Lining Anyways?

Despite Bakkt’s disappointing first week, it’s definitely worth noting that the platform is a step in the right direction. While it may not get the traction it was expected to get, Bakkt’s warehousing solution is regulated by the New York State Department Of Financial Services (NYDFS) which makes it a qualified custodian. 

In addition to that, Bakkt’s Bitcoin futures contract guarantees physical delivery. In other words, at the end of the expiration date, the user will receive an actual Bitcoin rather than its cash equivalent. Purportedly, this can guarantee liquidity which is much higher compared to futures contracts that don’t offer a physical settlement. This goes on to show that despite the short-term disappointment, Bakkt is certainly a step in the right direction for the longer term. 

 

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