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ICE’s Bakkt Delays Bitcoin Futures Launch to 2019

Intercontinental Exchange (ICE), the operator of 23 leading global exchanges including the New York Stock Exchange (NYSE), confirmed that no matter delay, they still have plans to create a Microsoft cloud-powered open and regulated, global ecosystem for digital assets.

The operator of NYSE announced only few months before, that they will be forming a new company, dubbed “Bakkt,” and that the intention is “to create an integrated platform that enables consumers, merchants, and institutional clients to buy, sell, store, and spend digital assets on a “seamless global network.”

First use cases will be for trading and conversion of Bitcoin (BTC) against fiat currencies, which ICE notes is currently “the most liquid cryptocurrency.” This conversion into fiat will enable consumers to purchase any item at their local Starbucks, in what will be crypto’s debut with the popular chain.

The ecosystem is expected to include “federally regulated markets and warehousing” alongside “merchant and consumer applications”.

The platform explained that “the new listing timeframe will provide additional time for customer and clearing member onboarding prior to the start of trading and warehousing of the new contract.”

In an announcement, Bakkt CEO Kelly Loeffler expanded on this statement, saying that the “volume of interest” in the company and the “work required to get all the pieces in place” contributed to the delay.

She said:

“Given the volume of interest in Bakkt and work required to get all of the pieces in place, we will now be targeting January 24, 2019 for our launch to ensure that our participants are ready to trade on Day 1. As is often true with product launches, there are new processes, risks and mitigants to test and re-test, and in the case of crypto, a new asset class to which these resources are being applied. So it makes sense to adjust our timeline as we work with the industry toward launch.”

The platform previously revealed it would launch physically-settled bitcoin futures, meaning clients would receive bitcoin upon the expiration of their contracts, rather than the token’s cash equivalent.

This most recent announcement also contained more news than a delay notice. Loeffler said that the company is exploring ways “to expand [its] offering,” adding that Bakkt will offer “insurance for bitcoin in cold storage”.

“We’ll share more about some of these new features in the coming weeks but as a start, I’m pleased to announce that we have insurance for bitcoin in cold storage and are in the process of securing insurance for the warm wallet within the Bakkt Warehouse architecture.”

For each purchase of USD/BTC futures contract, there would be a physical delivery of one Bitcoin in the client’s account at the time of settlement. This is different from the cash-settled Bitcoin Futures contract by CME and CBOE which means that no actual crypto assets exchange hands at the time of expiry.

However, Bakkt received some criticism which stated that its contracts could mask “hidden leverage”. Responding to it, Bakkt said:

“A critical element to price discovery is physical delivery. Specifically, with our solution, the buying and selling of bitcoin is fully collateralized or pre-funded. As such, our new daily bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset.”

This delaying might not be such a good news for crypto investors. Analysts had speculated that Bakkt’s scheduled December launch could help catalyze a year-end crypto market rally, predicting that the bitcoin price could ascend as far as $15,000 heading into the new year.

However, it seems that Bakkt is pretty optimistic about the BTC market while saying that:

“Bitcoin today accounts for over half of total crypto market capitalization and has been deemed to be a commodity, and its derivatives are regulated in the US by the CFTC. As the world’s most liquid and widely distributed cryptocurrency, and where we’ve seen the most customer demand, bitcoin’s profile creates a liquid product on which to build a futures contract. We’ll consider additional contracts as the landscape evolves and as we receive additional customer feedback about what they want and need.”

They also explained that given the transparency and regulation of the futures markets, the futures price in a one-day physically settled bitcoin contract will serve as a price discovery contract for the market. There is no reliance on cash platforms for settlement prices for pricing the daily bitcoin futures contract.

Many experts still believe that the launch of the Bakkt platform will encourage more institutional players to participate in the crypto market while increasing the probability of the arrival of Bitcoin investment products like the Bitcoin ETF.

As part of its efforts to develop the product, Bakkt previously announced it was working with BCG, Microsoft , and Starbucks. The companies provided assistance in both customer experience and risk management for the product.

Maria Smith, vice president of partnerships and payments for Starbucks, said:

“As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted and regulated applications for consumers to convert their digital assets into US dollars for use at Starbucks.”

Cryptocurrency skeptics have challenged its use for payments because of its volatility. With Starbucks taking cryptocurrency seriously, it could help bitcoin break through as a mainstream currency. It could also be bullish for prices, which have struggled to find footing since the end of 2017.

“It’s very big news for bitcoin because people say, ‘Where can you spend it?’ Now at every single Starbucks,” said then Brian Kelly, founder and CEO of BKCM. “Starbucks is seeing some kind of demand for acceptance of crypto and bitcoin, and to tie up with a huge regulated institution like the ICE is really positive for the space.”

Just for reminder, in October, early Coinbase executive Adam White announced he will be leaving the company for ICE’s Bakkt Platform.

He then said that he believes that ICE’s new venture will be the catalyst for those institutional investors that have been “waiting on the sidelines” to enter the crypto space.

“In 2017, I saw a big shift. The interest in Bitcoin and other currencies started changing from retail to the institutional side. But the level of infrastructure of the existing trading sites often didn’t meet their expectations,” he said.

ICE’s Bakkt Delays Bitcoin Futures Launch to 2019

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