Bakkt’s Bitcoin Futures contracts are available in two options ‘Daily and Monthly contracts’ will settlements taking place in physical Bitcoin tokens.
ICE‘s Bakkt platform has finally announced its Bitcoin Futures contracts going live today, September 23. Bakkt‘s Bitcoin Futures launch comes as per its earlier announced schedule after the U.S. Commodities and Futures Trading Commission (CFTC) gave the exchange a green signal last month.
The first Bakkt Bitcoin Futures trade was executed at 8:02pm ET at a price of $10,115
— Bakkt (@Bakkt) September 23, 2019
As part of the announcement, Bakkt provides two contracts – Bitcoin Daily Futures Contracts and Bitcoin Monthly Futures contracts. Bakkt’s Bitcoin Futures contracts are physically-settled, meaning the settlement takes place in physical BTC tokens after clearance by the ICE Futures U.S.
As per experts, Bakkt’s Bitcoin Futures contracts will most-likely attract institutional players. The futures contracts will provide safe entry to institutional players willing to participate in the crypto market.
To further ensure the safety of funds, Bakkt also has its custody solutions for secure storage of the BTC tokens. The Bakkt Custody aka the Bakkt Warehouse offers both – hot and cold storage options for the Bitcoin tokens. The official website reads:
“The Bakkt Warehouse is comprised of both online (“warm”) and offline, air-gapped (“cold”) digital asset storage. Bakkt rebalances between warm and cold storage tiers to minimize risks associated with warm storage”.
The regulatory body -New York State Department of Financial Services (DFS) – has previously authorized “Bakkt to provide custody services for bitcoin in conjunction with the launch of physically delivered bitcoin futures contracts”.
Giving its investors a sense of higher security, Bakkt’s storage solutions have a $125 million insurance policy backing. To make its token safekeeping process robust, Bakkt is also working with BNY Mellon, one of the world’s largest custody banks. Bakkt also has “Bank-level AML/KYC policies, paired with extensive blockchain surveillance”.
For investing in Bakkt’s new Bitcoin Futures products, the platform has a “hedge initial requirement” of $3,900 and “speculative initial requirement” of $4,290.
Bitcoin Price Tanks Below $10,000
The entry of Bakkt’s Bitcoin Futures Contracts is not very encouraging for the market with respect to the Bitcoin price movement. Early today, Bitcoin price tanked below its major support of $10,000 levels. This is for the second time in the last seven days that Bitcoin has slipped below the $10,000 mark.
Moreover, the weekly chart also shows that there’s downward pressure on the world’s largest cryptocurrency. At press time, Bitcoin is trading at a price of $9945 with a market cap of $180 billion. While Bitcoin continues to have 68% domination on the overall crypto market, the market picture is not very encouraging.
It would be too early at this stage to comment on the impact of Bakkt’s Bitcoin Futures on the market. As some experts previously said, the Futures contracts will bring-in more liquidity with higher institutional participation in the crypto market.
As per the existing data, the volume of Bakkt bitcoin monthly futures contracts is 18 BTC. Explaining the reason for this low volume, CEO of FX Hedge Fund Three Arrows Capital and Co-Founder of Sensus Markets tweeted:
Bakkt will be likely first a trickle and then a flood. The reality is that most regulated futures contracts get low adoption on day1 simply b/c not all futures brokers are ready to clear it, many ppl want to wait and see, the tickers are not even populated on risk systems, etc.
— Su Zhu ? (@zhusu) September 23, 2019
In a similar view, Computer scientist and cryptographer Adam Back said that CME also received similar mild response on day-one of its launch back in December 2017. He added:
“Bakkt adding a new way to buy Bitcoin, adds a regulated market more institutions can use. but we won’t really “find out tomorrow” as it takes time for companies to setup accounts, decide trading strategies & for volume to build. recall CME futures open vs today’s growing volume.”