ICE’s Bakkt Paves Way for Institutional Investors, Experts Hold
David Mercer, CEO of LMAX Exchange – the institutional exchange for global Forex trading as well as the operator of cryptocurrency exchange LMAX Digital, thinks that Bakkt’s 1-day futures contract which physically delivers bitcoin is the game changer the market has been looking for.
Unlike cash-settled futures contract where the trader receives or pays the difference between the price at which he purchased the contract and the price of its settlement, physical-settled ones remunerate the trader with a physical bitcoin.
According to Garret See of the investment firm DV Chain, this makes trader a lot less risky and it also facilitates better arbitrage trades. Fundstrat’s Tom Lee also holds that this is a substantial advantage over existing cryptocurrency exchanges like Binance and Coinbase.
Physically-settled bitcoin futures would also mark a key development in the market because they would require a bitcoin infrastructure to transfer cryptocurrencies. Furthermore, they would also require the go-ahead from the Commodity Futures Trading Commission (CFTC).
Bakkt is intended to have all of the above handled:
As an initial component of the Bakkt offering, Intercontinental Exchange’s U.S.-based futures exchange and clearing house plan to launch a 1-day physically delivered Bitcoin contract along with physical warehousing in November 2018, subject to CFTC review and approval. – reads the official release.
Patrick Rooney of Trading Technologies commented on the matter, saying:
That’s massive. A very, very big deal.
Others have also expressed the importance of a custody solution from a trusting source. According to investment expert Mike Novogratz, this is what would drive the next big increase in Bitcoin’s price:
I think the next move up is going to need custody from a trusting source. It’s going to need a little more regulatory clarity. […] We wouldn’t take out $10,000 without those two things because that’s what brings the institutional investors in. But we’re going to get there.
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