Bakkt To Begin Offering Its Physically-Settled Bitcoin Futures On December 12
Intercontinental Exchange (ICE), the U.S. company that owns the New York Stock Exchange (NYSE), has announced that it will launch the Bakkt Bitcoin (USD) Daily Futures Contract on its newly formed Bakkt platform on December 12, 2018.
As per the press release published on October 22, 2018, ICE Futures will unveil the physically-settled daily futures contract Bakkt Bitcoin (USD) that will be backed by actual BTC held in ICE’s Digital Asset Warehouse. ICE Clear U.S will be the clearing venue for the asset.
According to the press release:
“Each futures contract calls for delivery of one bitcoin held in the Bakkt Digital Asset Warehouse and will trade in U.S. dollars and others.”
It also added that only “one daily contract will be listed for trading each Exchange Business Day.”
The Bakkt platform looks at creating an open and compliant ecosystem that allows easy access to the digital asset class.
The blockchain project has been designed using the technology of household brand Microsoft, via its cloud technology. It also utilized tech support from Boston Consulting Group.
Notable investors in the project are Galaxy Digital, owned by billionaire Mike Novogratz, and crypto investment company Pantera Capital. Others are Horizons Ventures, Alan Howard, Protocol Ventures, and Susquehanna International Group.
Operating within a regulated ecosystem, Bakkt aims at catering to the needs of institutional investors whose desire to get into crypto is hampered by regulatory and security concerns.
In September, the Bakkt announced that the upcoming physical bitcoin futures would be available for trading against three major fiat currencies- the U.S. dollar (USD), the British pound sterling (GBP), and euro (EUR).
The firm also said that physical delivery was “critical” to price discovery and that their solution provides a fully collateralized or “pre-funded” avenue for buying and selling of Bitcoin (BTC).
In the aftermath of its announcement about a futures contract, Bakkt faced criticisms of having the potential to disguised “hidden leverage.” The firm’s execs responded and clarified that that was not going to happen. Writing in a blog post, the exchange said:
“Our new daily bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset.”
The ICE announcement also states that the solution is awaiting regulatory approval. It will, however, list (one) daily contract for trading on each Exchange Business Day.
There will not be daily price limit, with one purchase of the USD/BTC futures contract seeing the platform deliver one bitcoin (BTC) into the investor’s account at settlement.
Those Bakkt Bitcoin futures will land in the market a year after the CBOE and CME launched their respective cash-settled futures contracts. Unlike the Cboe and CME, the new digital offering will allow investors to access actual crypto assets.
ICE’s crypto plans are likely to play a central role in the digital asset marketplace, helping the nascent asset class gain more traction with big money investors. It will also help drive the crypto industry towards traditional financial institutions that have so far shown a lot of reluctance when it comes to crypto.