The best crypto minds understand what Bakkt is about to unveil on December 12. Less than a month away from inviting institutional ‘fomo’ to satisfy itself with the protection and trust of the ICE network of exchanges and history. Bakkt is going to be big – and crypto hedge funds, family offices, and Tier 1 global investment banks are prepared to take advantage.
If you are reading this what do you really know about Bakkt and what is about to happen to Bitcoin and the crypto markets connected to the newly formed firm?
Here is what you should know. Every single serious crypto investor, personality, institution, and hedge fund is talking about Bakkt. Almost exclusively. They don’t care about a Bitcoin ETF. They care about the Bakkt launch December 12th and the enormous volume of trading that will commence connected to the penultimate digital asset across the globe.
**A reminder of what Bakkt is and what it will actually launch on December 12th, via Forbes’ excellent article in early August: “Bakkt plans to offer a full package combining a major CFTC-regulated exchange with CFTC-regulated clearing and custody, pending the approval from the commission and other regulators. Bakkt will provide access to a new Bitcoin trading platform on the ICE Futures U.S. exchange. And it will also offer full warehousing services, a business that ICE doesn’t have. “Bakkt’s revenue will come from two sources,” says Loeffler, “the trading fees on the ICE Futures U.S. exchange, and warehouse fees paid by the customers that buy Bitcoin and store with Bakkt.”
Step back and consider what you just read. A CFTC-regulated exchange, clearing, and custody. Some have often called Bitcoin ‘digital gold’. The infrastructure that Bakkt has built and is set to unleash takes the term ‘digital gold’ and makes it a reality.
But what does it all mean for the price of Bitcoin? What does it mean for continued and deeper adoption?
Those are precisely the reasons that both Microsoft and Starbucks were announced as partners when Bakkt released its vision in August. It is precisely the reasons that Fortress, Susquehanna, and Eagle Seven were more than happy to be included in the press that was done regarding the announcement of Bakkt onto the scene.
This is the biggest and most important initiative since Bitcoin was born. Period.
So what is the crypto ‘smart money’, where billionaires have been nibbling at the Bitcoin pie for the past three to five years, saying about Bakkt? Why is it the one initiative that lights up their eyes and gets them quickly talking about what ‘could’ and ‘should’ happen?
One ‘substantial’ crypto hedge fund manager that we spoke with had this to say about Bakkt:
“Nothing else on the horizon comes close to what Bakkt will mean for Bitcoin. The depth and breadth of the ICE (Intercontinental Exchange) network and exchange ecosystem means that adoption/trading volumes will skyrocket overnight. The same pipes and structures that allow Goldman, JPMorgan, Morgan Stanley, among a horde of others, to trade billions in commodities like gold, silver, soybeans, and corn; will be the same architecture used to trade Bitcoin.”
“Think of it this way…with the custody and ‘warehouse facility’ solved inside of Bakkt’s infrastructure you have solved the final issue that institutions have been clamoring for in the digital asset space. Their Bitcoin transactions and investments are ‘safe’ via the warehouse facility, and the ability to go claim their Bitcoin straight from the warehouse should they allow their position to mature to that point.”
“Rather than ‘physical’ Bitcoin per se, you are getting access to Bitcoin being housed in an uber protected, heavily secure facility that will hold the digital asset as the backstop for Bitcoin. That is what the Novogratz’ of the world and Goldman and JPMorgan have been clamoring for.”
“While it would be interesting if Bakkt got the press it deserved, there really isn’t a single ‘name’ banking institution that could accompany them in a headline. And that is precisely the scale of the Bakkt story. The ramp up and volume with be enormous and lightning fast. Within months you will have billions of dollars in institutional cash running through Bakkt’s system, buying and selling Bitcoin.”
“This is ultimately the solution that the biggest players (within banking) want and need. And this move furthers the narrative of Bitcoin as a ‘store of value’ or ‘digital gold’.”
**Several points to make sure we deconstruct here – the custody solution that Bakkt is proposing and will launch with is remarkable. To treat Bitcoin in the same way that wheat, corn, or copper is treated may not sound sexy, but it actually is. Institutions will flock to the asset because the custody issue has been solved, de-risked, and security layers will have been deployed to the underlying ‘warehoused’ Bitcoin. Every major investment bank trades billions of dollars of their own assets, and client assets on ICE’s network of exchanges across the globe (12 global exchanges, 6 clearinghouses). Adding Bitcoin as a commodity within its already deeply established exchange, clearing, and warehousing infrastructure makes Bakkt the immediate and defacto leader. Every investment bank in the world will now be able to trade Bitcoin in the same way that they would trade gold or silver. That capability does not exist, on this scale, anywhere else.
A second hedge fund manager gave us a little more color on what Bakkt means for their business:
“Institutional trading and recognition of Bitcoin as a legitimate asset class is what Bakkt brings to the table. The legitimate (not smoke and mirrors) to brand like the NYSE, Microsoft, and the family of ICE exchanges is infinitely bigger than a Bitcoin ETF approval. An ETF approval might make headlines, but you are about to watch crypto trade desks metastasize across Wall Street connected directly to what Bakkt is providing all of us.”
“Remember, all of the IB’s (investment banks) are massive clients of ICE and the NYSE. They transact billions upon billions of daily transactions in other commodities on their platforms across the US, Europe, and Asia. Positioning an initial digital asset such as Bitcoin within ICE’s exchange architecture makes it just as easy to trade as gold or wheat. The custody solution has been the final frontier for larger institutions, and Bakkt has effectively solved that problem.”
“What do I expect in terms of price movement as Bakkt launches and moves beyond the end of 2018? I expect that Bitcoin will make a move up close to the 10k mark as volume picks up dramatically and clients continue to clamor for a piece of the ‘future of money’.”
A few words about the architects of Bakkt and their vision, via Fortune’s article several weeks ago:
“Bakkt is the brainchild of Jeff Sprecher, the founder, chairman, and CEO of ICE, and a disrupter par excellence. Sprecher (pronounced “Sprecker”) stands alone as the leading force in modernizing the world’s exchanges in recent years from open-outcry pits into super-efficient electronic marketplaces. Along the way, Sprecher built a flailing electricity exchange that he reportedly purchased for $1 into a global trading and data empire now worth $44 billion. “In 25 years he’s gone from nothing to the most powerful exchange entrepreneur in the world,” says Larry Tabb, chief of consultancy the Tabb Group. “He hasn’t failed yet.”
“Sprecher and his investment partners are putting this one-of-a-kind mission in the hands of a first-time CEO who’s Sprecher’s soulmate in both business and in life: Kelly Loeffler. The ICE executive has ridden shotgun alongside Sprecher since the company’s fledgling days in 2002. In 2004, they married. Loeffler long ran marketing, investor relations, and communications for ICE. Now she’s giving up her ICE roles to run Bakkt.”
As Michael Novogratz was quoted as saying on the day that the Bakkt news was released, “Heard from a contact that you never want to be ‘short’ Jeff Sprecher, so we are happy to be long.”
The point being made by Novogratz is that Jeff and Kelly have been phenomenally successful in bringing products to market at just the right time, in just the right place, and to just the right customers.
Nearly every member of the crypto ‘mind-hive’ would agree with him – and many of them have large stakes in Bakkt and its pending success.
**A quick and short word about some rumors connected to Bakkt and future coin listings. We heard from one source that Bakkt initially planned to list more than just Bitcoin on its exchanges but pulled back. Bitcoin and Ethereum, and before that, possibly a third digital asset were considered. We were not able to confirm with a second source that this was true (in fact, we were told that the veracity of that claim was ‘dubious’ at best) or get our hands on the actual offering documents. We did, however, have several conversations that made it sound like Bakkt would eventually like to list another ‘non-security’ token across its platforms, and that token would likely be Ethereum. Again, as of yet, Bakkt has yet to share any public guidance around additional listings or any other rumor that may have arisen since their announcement.**