Bakkt Bitcoin Futures are Coming – Will the Bitcoin Price Go Up?
- In December, Bakkt Bitcoin futures will start trading on the Intercontinental Exchange (ICE)
- The ICE owns 12 regulated exchanges and marketplaces globally
- Bakkt LLC will physically back futures contracts using real Bitcoin, making futures similar to long-awaited Bitcoin ETF’s
Will Bakkt Send the Bitcoin Price Soaring?
2018 may become known as the worst Bitcoin winter in history. While eventually finding support at $6,000, the year has seen near month on month Bitcoin price pullbacks. However, all this could be about to change, due to new Bitcoin futures contracts offered by Bakkt.
What is Bakkt & What are the Implications for Bitcoin?
In August 2018, New York stock exchange owners the Intercontinental Exchange (ICE) announced the formation of a new company, Bakkt. What is so exciting about Bakkt, is the fact that the company is creating the world’s first federally regulated market for cryptocurrency.
Essentially, Bakkt will provide a Bitcoin and wider cryptocurrency market custodial service. More specifically, one which will allow institutional investors to buy Bitcoin futures contracts which are settled using real Bitcoin.
Bakkt Futures Could Result in a Bitcoin Price Boom
According to digital currency investing firm Greyscale Investments, the launch of Bakkt Bitcoin futures is already drawing institutional investors out of the shadows. In fact, 73% of $81.1 million recently invested in crypto assets, can be attributed to new institutional, rather than consumer investment.
Institutional investors seem to be buying Bitcoin (and other cryptocurrencies) in anticipation of a new Bitcoin bull run. Specifically, one which will take place when Bakkt (and a possible favorable Bitcoin EFT ruling by the SEC), will make it easy to buy digital assets just like regular stocks. However, it is also possible that Bakkt Bitcoin futures contracts could have an unfavorable effect on the Bitcoin price.
Bitcoin Price Stability is Still a Pressing Issue
Those who believe that Bakkt Bitcoin futures will signal an end to crypto winter, do so for several reasons:
- Institutional investors are believed to want to enter the cryptocurrency market but aren’t in favor of buying coins on unregulated exchanges
- It is assumed that investors intending to enter the market, will do so to benefit from favorable long-term returns offered by Bitcoin
- Many believe that when Bakkt futures and possible ETFs materialize, institutional investors will race to invest billions of dollars in Bitcoin overnight
Will Bakkt result in rapid Bitcoin price rises? Possibly. However, the opposite could also be true.
Bakkt will only be launching 24-hour Bitcoin futures contracts. This being the case, institutional investors (for now, at least) will only be able to bet for or against daily Bitcoin price rises. Also, several other factors need to taken into consideration.
- Hundreds, possibly thousands of consumer investors who bought Bitcoin at $20,000, will likely look to sell as soon as Bitcoin retests notable former price levels
- Institutional investors aren’t stupid and may be buying Bitcoin now to short the market when prices rise, but later correct
- There is a case to be made that COBE Bitcoin futures helped drive down the Bitcoin price in 2018, as more investors bet against Bitcoin than for the digital currency
When will Bakkt Bitcoin Futures Launch?
The first Bakkt Bitcoin futures contracts are scheduled to make their debut on December 12, 2018. This being the case, we may be just a month away from the end of crypto winter. However, even optimistic investors should be mindful of the fact Bakkt could just as easily turn out bad for Bitcoin as it could good.