NYSE’s Parent Company is Launching a Bitcoin-friendly Platform
By: Andrew Wong
Tags: Bakkt, Nyse, Etf, Bitcoin, Cryptocurrency

NYSE’s Parent Company is Launching a Bitcoin-friendly Platform

The owners of the New York Stock Exchange, Intercontinental Exchange, have recently announced a Bitcoin-focused venture called Bakkt.

The Bakkt platform could very well be the institution-friendly solution that the space has been waiting for, possibly opening the floodgates for “big money” to enter into Bitcoin and other digital assets.

The Bakkt project appears to have two main objectives:

1. To help consumers and institutions buy, sell and store digital assets

2. To help people spend digital assets on everyday things.

So, how exactly are they facilitating this?

Providing ground-breaking Bitcoin futures

The first product that Bakkt will offer is a physically-delivered Bxitcoin futures contract.

You may be thinking, CME and CBOE exchanges already offer Bitcoin futures — so what’s the big deal?

The answer lies in the words “physically delivered”.

Physically-delivered means that the underlying asset (in this case, Bitcoin) is required to be delivered to settle the contract.

Until this point, all Bitcoin futures (CME, CBOE), have been cash-settled. None of the parties that are involved handle Bitcoin at any point, and all profits and losses are usually settled in US dollars.

Physically-delivered futures will legitimately contribute to demand for Bitcoin, rather than just “betting” on its price.

Keeping your coins safe and insured

Holding your own digital assets can be risky, especially if you’re new to the space or investing large sums of money. Private keys can be lost, and accidental transactions cannot be reversed.

The lack of a regulated, insured, and trusted party to handle these matters is one of the key reasons that institutional money has not yet been able to tap into this market.

Bakkt may finally provide the custody solution that institutional investors have been waiting for.

Adequate trust in security and competency are both vital to asset custody, and what better company to trust with your digital assets than the owners of the NYSE themselves.

Letting you buy your morning coffee with Bitcoin

Perhaps the most discussed part of the Bakkt venture is their partnership with Starbucks, which will enable people to pay for their coffee with their Bitcoin balance.

This has been somewhat misconstrued, however, as Starbucks are not actually receiving the Bitcoin themselves.

A report from Motherboard (VICE) has cleared up some of the confusion that has arisen from headlines published by the media. They were able to reach out and receive this quote from a Starbucks spokesperson:

“It is important to clarify that we are not accepting digital assets at Starbucks. Rather the exchange will convert digital assets like Bitcoin into US dollars, which can be used at Starbucks.”

While that may be a let-down to some, it does appear that this will be a very streamlined process which will circumvent the more arduous process of manually exchanging digital assets for spendable cash.

What effect will Bakkt have on Bitcoin price?

Enabling institutional investment — bullish, medium-term

As mentioned above, the Bakkt custody service in particular will be a singificant enabler for institutions to finally gain some exposure to digital assets.

Despite their volatility, Bitcoin and other digital assets remain very attractive to investors for a small portfolio allocation, due to their somewhat uncorrelated nature and huge potential upside.

Even if Bitcoin is given a miniscule allocation in major funds, this would be huge for its price.

One step closer to ETF approval — bullish, long-term

The Bitcoin community (and market) has appeared to have a strong fixation on Bitcoin ETF approval, yet many seem to not have recognized the impact that Bakkt may have on this finally happening.

The potential improvements to the legitimacy, size, and security of Bitcoin markets will address many of the issues that the SEC have had with approving a Bitcoin ETF so far.

As widely quoted, Brian Kelly observed on CNBC’s “Fast Money”:

“They’ll now have a U.S.-regulated exchange, and they have a licensed warehouse, which is how commodities are stored, and that’s going to make it a lot easier for an ETF to come through.”

It will take some time to achieve satisfactory volume and exposure, but as soon as the market can see an ETF finally being approved, you can bet that the price will reflect it.

Normalizing crypto — bullish, long-term

Many are lamenting the revelation that Starbucks aren’t directly accepting Bitcoin payments, however the partnership is still very bullish for the digital asset space.

The simple association with the Starbucks name will bring a lot more legitimacy, recognition, and awareness to Bitcoin, and assist with erasing its “underworld” stigma.

Being able to safely store and spend digital assets could also encourage many more people to hold more of them vs traditional cash, and will normalize “spending” digital assets on everyday goods and services.

These effects will undoubtedly have a positive impact on Bitcoin’s price, but probably in a quieter way over months or years.

What do the charts say?

The Bakkt announcement doesn’t look like it’s had a short-term effect on Bitcoin’s price at all so far, as price continues to settle closer and closer to support at about USD$6,000.

This is somewhat surprising given the magnitude of the effect Bakkt could have on Bitcoin investment and adoption, but it may take the news a little more time and exposure to really hit home.

Uncertainty in the market regarding the legitimacy of Tether’s USDT may have something do with it, with the popular stablecoin currently trading below parity with the US dollar.

Bakkt isn’t alone

Even more recently, Fidelity Investments announced the launch of their own digital asset platform, Fidelity Digital Assets.

Yes, the same Fidelity Investments that manages over $7.2 trillion in client assets.

Like Bakkt, Fidelity Digital assets will also provide a custody solution, as well as trade execution services.

Having not one, but two major players entering into the space really goes to show that there’s legitimate institutional demand for digital assets.

Conclusion

Although it hasn’t yet been reflected in hype or price, the launch of Bakkt and Fidelity Digital Assets will prove a huge step forward for Bitcoin and digital assets in general, advancing their exposure and adoption over the coming years.

The reputable names behind both ventures bring a strong air of legitimacy to the space and their custody solutions, which may very well kick-start wider institutional investment.

While the Bakkt partnership with Starbucks isn’t direct adoption like many hoped it would be, it’s a step towards normalizing the possession and spending of digital assets, and it’s only a matter of time before more merchants join in.

Intercontinental Exchange has announced that Bitcoin (USD) Daily Futures Contracts will be available for trading on December 12th.