Since ICE (InterContinental Exchange) first announced Bakkt – a digital assets exchange aimed at allowing institutional investors to dip their toes into the cryptocurrencies market, while enjoying regulatory protection – the digital currencies market has been locked in hot debate regarding whether or not the project would be good or bad for the space. Some believe Wallstreet’s entry into the fledgling market may hurt it, while others view it as the key to mass adoption.
ICE, the financial powerhouse, and parent company of the prestigious New York Stock Exchange, ICE Data Services, TMC Bonds, as well as Singapore Mercantile Exchange, among others, intends to offer institional investors a fully regulated and scalable platform, from which they can trade digital assets. What differentiates the Bakkt project from the CME’s (Chicago Mercantile Exchange) offering, is that Bakkt will include a regulated, secure crypto custody service, as well as enable consumers to purchase retail goods with cryptographic assets.
The firm behind Bakkt boast a global staff of 5000 people and posted revenues of $5.8 billion in 2018, this puts it in such a reputable position that they have attracted high profile partnerships. Software giant, Microsoft, joined the project to provide cloud infrastructure the payment platform for consumers looking to use the platform for crypto payments. Boston Consulting Group is another major partner, and will bring on their portfolio of Fortune 500 companies to aid with the institutional adoption effort, while Starbucks will help expose the platform to over 23 million consumers.
Although the Bakkt platform will allow users to pay with Bitcoin, the transactions will not consitute direct payment. Bakkt will instead, instantly convert digital assets to equivalent fiat value to make up to the steep price fluctuations associated with the cryptocurrency market.
Arguments Against Bakkt
While Bakkt is currently testing it’s platform with a select group of users ahead of it’s January 24th launch of Bitcoin Futures Trading. There are a number of crypto pundits who believe the project goes against the very principles of crypto.
They believe the growing number of crypto derivatives products and institutions entering the space could bring about a situation where Wallsteet seizes control of the crypto market by manipulating or exaggerating Bitcoin’s price and recklessly using the BTC in custody to leverage a host of other investment positions. This, they claim, goes against the fundamental values of cryptocurrency and could lead to a similar market dump as 2008-2009, which inspired the creation of Bitcoin.
Arguments For Bakkt
While detractors raise some valid points, the Bakkt team states that there is nothing to worry about, as the will be no leveraging rehypothecation or commingling on the Bakkt platform. Bakkt, it is said, will open the market to higher trading volumes as a large number if institutions are expected to move from the shadowy Over-The-Counter market to the regulated and transparent Bakkt platform.
The Bakkt platform’s launch, as experts speculate, could set a good enough precedent, for the SEC (Securities and Exchange Commission) to approve the 10 or so other crypto ETF’s currently awaiting approval. Which only means higher adoption rates.
The Bakkt platform may also lead to more transparent and profitable token sales, as the fundraising vehicle will be overseen by a regulatory body. More transparent token sales means higher amounts of money will be raised, due to the involvement of institutional investors.
“Warning: There’s no guarantee that Bakkt will lead to higher prices immediately. Heck, from everything we can tell, large institutions have already been buying Bitcoin throughout the year — especially on the OTC markets, which are mostly off the radar. And this buying was apparently not enough to prevent Bitcoin from breaking critical support at $5,800.” – analyst, Dr. Bruce Ng, in a blog post for Wess Crypto Ratings
“…In the long term, however, the outlook is much clearer: Projects like Bakkt could greatly enhance the liquidity, stability and overall size of crypto, helping to create a multitrillion-dollar global marketplace unlike any we’ve seen before.” – he went on to say
The Bakkt project promises to bring large amounts of value into the crypto space and has been set up to protect users from unscrupulous behavior. Whether it will ultimately be good for the digital assets market remains to be seen. It will, undoubtedly, lend a level of sophistication and legitimacy to the cryptocurrency market.