Bakkt Bitcoin Futures Not 100% Backed by Physical Bitcoin

  • Stabbed the market in the Bakkt: 37% of futures are “backed by dollars or treasuries”
  • Bakkt’s No Different, It’s Just like CME and other Bitcoin Futures Exchange
  • Almost nobody takes physical delivery of Bakkt Bitcoin Futures

In September, after much anticipation Intercontinental Exchange that also operates the NYSE exchange launched the Bitcoin futures platform Bakkt.

After a disappointing start, with just 72 contracts recorded in volume on its opening day, Bakkt gained momentum towards the end of October. In November, it started making new records almost every day.

The latest entrant in the Bitcoin Futures market, Bakkt hit a fresh record on Nov. 27 with volume of 5671 BTC.

Comparing Bakkt’s record volume to that of the Chicago Mercantile Exchange (CME Group), the first one to launch Bitcoin futures contracts in 2017 and where 1 BTC contracts equal 5 BTC, analytics platforms Sewdotcom stated that Microsoft and Starbucks backed platform is catching up with CME.

“Bakkt’s hitting new daily volume records almost daily,” reported Skewdotcom adding,

“Bakkt’s ATH volume vs CME was actually reached on Nov 6th: yesterday’s “record” is actually quite far, although the trend is clearly positive!”

However, economist and trader Alex Kruger says, “Bakkt is no panacea.”

Bakkt’s No Different, It’s Just like CME and other Bitcoin Futures Exchange

Given the fact that ICE is behind Bakkt is big in itself. The regulated bitcoin futures platforms also received greenlight from NYDFS to operate as a trust.

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But even more exciting was that Bakkt was going to offer the first physically delivered futures to trade on a regulated market.

In a medium post last year, Bakkt CEO Kelly Loeffler explicitly pointed out that “new daily Bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset.” And this is what “differentiates” Bakkt from “existing futures and crypto exchanges which allow for margin, leverage and cash settlement.”

As such, people believe that Bakkt’s volume is fully backed by Bitcoin. But that is not “even remotely the case.”

Almost nobody takes physical delivery of Bakkt Bitcoin Futures

For starters, 37% of Bakkt futures are “backed by dollars or treasuries.”

This is no big deal and just busting the myth as Kruger says but many believe Bakkt futures to be fully backed by Bitcoin which is “a widely held but false belief.”

Kruger explains that for Bakkt futures “almost nobody takes physical delivery.” However, this is “not a problem” because “It is normal for futures traders to not take delivery, in all assets. But Bakkt is no panacea.”

“Stunning how they changed the product and most of the industry didn’t even notice it,” Kruger said.

Despite all this, Kruger believes Bakkt will be “hugely bullish” someday while it is currently only “slightly bullish.”

 

 

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