The long-awaited Bitcoin warehouse and futures contract facilitator, Bakkt platform witnessed its celebratory launch on Monday, i.e., September 23, 2019. After facing two delays and 13 months of scrutiny, the Intercontinental Exchange-backed, Bakkt opened doors for institutional investors to trade in a federally controlled venue.
Highly anticipated contracts went live at midnight on September 23, 2019, 00:00 UTC and will close at 22:00 UTC. For the first time ever, the investors will be able to observe the demand value of this new service amongst a lot of traders. By June next year, Bakkt’s data feed will be made available freely after this it will require a subscription as revealed by a company FAQ.
Bakkt’s futures will be settled physically, which means that the buyers will receive Bitcoin at the expiration of contracts. Also, one of the prominent features of Bitcoin futures contracts is that they expire after a day. The user will receive the Bitcoin on the second business day after the contract’s date.
The one-day futures contract offered by Bakkt allows the investors to trade Bitcoin in an easier and convenient manner in comparison to crypto exchanges. Bakkt also offers a 30-day Bitcoin futures contract.
Lanre Sarumi, CEO of LevelTradingField, a crypto derivatives exchange operator, stated:
The basis to the cash market would be very tight. It’ll be interesting to see if it’s the lead or the follower. In theory, the cash market should dictate the price of the derivatives [futures] market. In practice, it’s the other way around for a lot of commodities.
“We could see decent trading volumes for the product,” said John Todaro, director of research at TradeBlock, “I would expect, however, that the demand would be somewhat in line with current cash-settled contracts, such as those offered by the CME.”
He further added that:
It will take time for these entities to become comfortable with the asset class, identify strategies that are best used to trade the space, understand crypto market liquidity, and also understand the different regulatory and tax obligations across jurisdictions they operate in.
Bakkt’s launch is undoubtedly expected to give a boost to other anticipated products in the financial world like ETFs or the Exchange Traded Funds. Futures contracts, which work as derivative products, are highly regulated by the authorities, especially more than the spot markets. This feature makes them more lucrative for regulators and institutional customers.
Todaro also added:
This offering, in addition to the CME’s, can help regulators become more comfortable with digital asset trading and market infrastructure.