As if we needed another reason to continue to anticipate the launch of Bakkt. In a late Sunday tweet Bakkt foreshadowed the future of their ambitions with the following line:
“…which could open the door for other products around crypto.”
This from a tweet at 4:42 PM. Deconstructing the backstory on ‘other products’ is the key here. Clearly, Bakkt doesn’t aspire to simply create and trade, ad infinitum, bitcoin futures and bitcoin futures alone. As competitors such as Nasdaq and ErisX push forward with multiple cryptocurrencies and futures that will be traded at their respective launches, Bakkt won’t be left behind.
To get a bit more clear-eyed on what other products Bakkt may be talking about that will come from a more orderly price book from Bitcoin take a look at the gold futures markets, spot markets, etc. What type of products has evolved from the ‘physically deliverable’ gold markets dominated by ICE, the parent company of Bakkt?
Orderly gold markets trade better than $100B worth of the commodity per day. The products that have been born from that type of volume have been the following:
- Physical gold is readily available to the public from all manner of sources.
- Gold ETF’s have been approved across the board and trade on several exchanges.
- Gold mutual funds have also become mainstream.
- Gold derivatives are traded amongst commodity exchanges.
- Gold futures are also traded across multiple commodity exchanges.
- Gold options.
**The collective trading in the above products approaches $500B on a daily basis.
Can anyone guess who manages the largest gold-based ETF’s in the world? Anyone? Anyone? BlackRock. Yes, that BlackRock – the worlds largest asset manager. And there just happens to be a story or two out there that connects BlackRock to Coinbase as the two comingle their efforts on potential crypto ETF products.
Bakkt aspires to be the foundation on which firms like BlackRock, State Street (SPDRS), Invesco, Vanguard, VanEck, and Deutsche Bank create Bitcoin and digital asset ETF’s. Collectively the aforementioned firms manage nearly $4T in ETF assets. FOUR TRILLION.
So it makes a bit of sense for Bakkt to have an interest in processing the type of digital asset volumes connected to an ever-expanding ETF ecosystem.
And this is the reason that Nasdaq, Bakkt, ErisX, and Fidelity have rushed into the custody and trading markets for Bitcoin and other large market cap digital assets. The fees and profits on ETF’s, mutual funds, options, and derivatives are in the 10’s if not 100’s of billion dollars a year.
Would Bakkt, Fidelity, and Nasdaq really announce large-scale crypto infrastructure if the smartest people in those firms have yet to do extensive due diligence on the expected profits? And those expected profits far outweigh the risks involved in digital assets? Of course, they have put the scales to it and their eyes have widened at the expected and potential profits.
Take a look at some commentary directly from Bakkt’s CEO, Kelly Loeffler regarding where Bakkt is headed – and we will highlight specific phrases that point to significantly more than just Bitcoin futures:
“Our goal is to make digital assets more liquid, trusted and accessible; allowing meaningful innovation to follow. Many in our space are working toward this objective.”
“By virtue of passporting ICE Futures U.S. and ICE Clear U.S. into other jurisdictions outside the U.S., institutions operating on a global scale can better serve their customers. Bakkt’s first contracts will be physically delivered Bitcoin futures contracts versus fiat currencies, including USD, GBP and EUR.For example, buying one USD/BTC futures contract will result in daily delivery of one Bitcoin into the customer’s account. This aspect of physically delivery adds to the utility of Bitcoin, beyond simply trading.”
“While there are many aspects of Bakkt that we’ll continue to develop and share, our initial focus is supporting regulated institutions in serving customers in this emerging asset class. The foundation on which we are building our solutions for buying, selling, storing and spending digital assets is not a piece of Italian Carrera marble, like the statue of David, but is built upon the time-tested, regulated futures markets — which have advanced markets ranging from coffee to gold for hundreds of years.”
“Key to cryptocurrency’s success is a trusted market price. We are working to create a regulated for of price discovery, which could open the door for other products around crypto.”
Again, the implications here over the next three to five years are enormous. A regulated and orderly market for large-cap tokens will turn a $150B – $200B market capitalization ecosystem into a $1T – $2T industry of scale. If the gold markets are any indication of what lies ahead for digital asset structured products and daily trading volumes – fill your bags right now.
Don’t be blinded by the pain of a bear market. Bakkt, Fidelity, Nasdaq and other global firms of scale are building and loading up. Shouldn’t you be?