If the Bakkt blueprint works as planned, a panoply of new Bitcoin funds would tap the pent-up demand for the cryptocurrency, making it a safe and easy choice for everyday investors—notably millennials getting their first 401(k)s. Wall Street could then tap Bitcoin’s popularity as an alternative to stocks and bonds to generate giant trading volumes. And that flood of institutional buying and selling, in turn, would take the terror out of Bitcoin by smoothing its wild swings in price.
Cracking the 401(k) and IRA market for cryptocurrency would be a huge win for Bakkt. But the startup’s plans raise the prospect of an even more ambitious goal: Using Bitcoin to streamline and disrupt the world of retail payments by moving consumers from swiping credit cards to scanning their Bitcoin apps. The market opportunity is gigantic: Consumers worldwide are paying lofty credit card or online-shopping fees on $25 trillion a year in annual purchases.
Bakkt’s founders tell Fortune that the institutional investor campaign is the first of two phases. They’re a little coy about the second phase. But the presence of Starbucks and Microsoft strongly suggests that Bakkt will strive to revolutionize the way consumers pay at the mall and online.
While Bakkt may be the first to market, the company faces competition: derivatives provider LedgerX and TD Ameritrade-backed ErisX are also looking to offer bitcoin futures contracts to investors. Seed CX and trueDigital are also working to launch forwards contracts, a similar product.
Here’s how Bakkt’s exchange for trading Bitcoin tokens, if approved, would operate. It would trade Bitcoin using what are known as “one-day futures,” contracts that would take the same amount of time to settle as trades in the current cash market, meaning in a single day. The broker-dealer would click on a posted price at anytime during the trading day on behalf of a money manager client. By the market close, the ICE clearing house would have arranged to route the cash from the buyer’s to the seller’s bank account, and the Bitcoin tokens would be en route the to the Bakkt digital warehouse.
The clients entrusting their Bitcoin to Bakkt could be either institutions managing Bitcoin mutual funds, or companies making cross-border payments in Bitcoin.
Take a look at an inside peak of what Bakkt Bitcoin (USD) Futures Product Overview.
Listen to our previous episode on Bakkt, where we discuss what they are looking to accomplish. Thriller Insider - S3EP 1: An Analysis on Bakkt & ErisX
Bakkt is looking to make Bitcoin mainstream the launch of the Futures Products is just PHASE ONE.
When it launched, ICE announced partnerships with big commerce brands including Microsoft and Starbucks to build an ecosystem for digital assets. Starbucks will leverage the platform to allow its customers to convert digital assets into U.S. dollars at their coffee shops, the firm said in August. That aspect of the plan is six months out, according to a direct source (back in Nov 20th 2018.) The source said the recent crypto market sell-off isn’t connected to Bakkt pushing back the start date for its derivative product. Rather, market participants want more time given the original launch date fell smack dab in the middle of the holiday season. ~ first reported from The Block
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