Bakkt’s Looks to Capitalize with Bitcoin Futures

The much-awaited Bitcoin futures product by Bakkt was finally launched on Sunday in hopes of capitalizing on Bitcoin’s rising popularity.

Bakkt is here to stay

Bakkt’s Bitcoin futures products experienced many delays before it was finally ready to say hello to the markets. Trading in the product began at 8 pm EDT and the first trade executed at the price of $10,115, i.e. the spot price of Bitcoin. Futures are derivatives products that have an underlying asset- like a currency like the USD, a commodity like gold or even stocks. Buyers of futures products don’t have to purchase the underlying commodity. Instead, they buy futures contracts and predict whether the price of the commodity will rise or fall.

Intercontinental Exchange, which helped launched the Bakkt futures product is the owner of the New York Stock Exchange. Bakkt intends to bring regulated cryptocurrency-based products for the users and increase transparency in this sector. Over the years, Bitcoin has gained popularity, but it hasn’t become well-known tool for making payments around the globe. The coin and thousands of other digital currencies are still operating from the shadows because of which they have been refuted by regulators and governments alike.

Why Bakkt’s offering important?

With Bitcoin futures, users who want in on the emerging cryptocurrency sector can comfortably invest without being subjected to the day-to-day volatility of the market. Bakkt is being supported by the venture-capital arm of Microsoft Corp, ICE, Starbucks Corp, and the Boston Consulting Group. Starbucks is reportedly interested in the idea of letting users pay for their coffee by using digital assets– either directly or by converting a digital coin into dollars before payment.

ICE’s latest Bitcoin futures also challenge CME Group, a long-term rival that pioneered Bitcoin futures offering at the peak of the coin’s maniacal rise in December 2017. On any given day, the company’s bitcoin futures witness a volume of $200 million. Given the rise of crypto prices this year, it has also decided to launch a Bitcoin options product for users in early 2020.

Historically, traders don’t prefer to change the platform once they have started using futures contracts at one place. ICE believes that the unique contract design at Bakkt will certainly attract customers, i.e. physically settled Bitcoin futures. To settle these contracts, the users will either have to deliver Bitcoin or settle in Bitcoin. This kind of contract is used in cocoa, metals and cattle futures but has never been applied to Bitcoin before.