Bakkt Futures: What does it mean for Bitcoin?
The Market Futures Leap
The cryptocurrency sphere doesn’t know the meaning of ‘uneventful.’ Seems like every other day, there’s some announcement or other making waves and either ushering in the golden age of crypto or delivering the killing blow to the dying, ill-conceived Bitcoin, depending on who you ask.
This week’s massive news comes from Bakkt, a subsidiary of Intercontinental Exchange, who has announced it will start offering Bitcoin futures in just a month.
The market reacted with its usual enthusiasm, in this case driving the value of BTC up by more than $1,000 as a response to this. Yet many people can’t really tell whether this is good, or how good it is.
Is this good for Bitcoin?
It’s certainly not bad. A largecompany choosing to trade Bitcoin, even in the form of futures (ie, you don’t get the bitcoin right away – but at a specified time in the future,) can’t possibly be a bad thing for, well, any market whatsoever.
However, there’s still the question of how good is it – and why it would be so good. One thing to consider is that the news itself isn’t very good.
Yes, the market reacted with increased demand, and the increased price that followed, but that reaction was to the expectation of what this might bring rather than to the futures themselves.
Truth is, selling BTC futures is nothing new. In fact, a company that doesn’t believe in BTC would have more reasons to sell futures than not, since futures are often paid at today’s prices but sold tomorrow.
If BTC were to crash, anyone selling BTC futures that aren’t backed-up would make a lot of money, while anyone buying them would lose it.
Let’s, however, make something clear: Bakkt is offering futures with an actual backup. This means they already have the BTC, so they don’t stand to make much money from a market crash.
This isn’t a scam. It’s just not a groundbreaking move either.
What could this bring?
Here’s where things get complicated, because nobody can see the future. Bitcoin’s price, as usual, went up due to expectation rather than facts. But in general, there are a few things people expect:
- Bakkt’s entrance into the crypto market marks yet another large company admitting Bitcoin might be a thing.
Considering the traditional market was completely dismissive of it a couple years ago and banks like JP Morgan openly tried to take down the cryptocurrency, this is an admission of defeat by powerful economic actors.
- Bakkt’s BTC offerings will all have backup – meaning Bakkt will have the BTC stored as soon as (or even before) futures are bought. This means two things: First, Bakkt will pay market price for the cryptocurrencies.
Second, since the transactions are futures, Bakkt will be pledging to hold those coins for the duration. More coins being held means fewer in circulation. Fewer coins in circulation means a higher market value for each.
- Lastly, Bakkt has reportedly struck a deal with Starbucks to create a system that will allow the coffee chain to accept payment in BTC. While this deal may or not come to happen, were it to be positive this would be a huge step towards bringing BTC into the mainstream.
As you can see, there are reasons for the excitement, which means there are reasons why the market reacted as it did. However, it’s all speculative for now –
Bakkt could well be wanting to offload BTC it is holding, and the plan with Starbucks could well fail due to the difficulty around allowing micropayments using BTC without creating an alt network that would sacrifice many of the advantages of crypto.
Still, for now the reaction has been that of a bull market, which is good news for BTC investors since the token actually lost value over the last few weeks. This might mean great things are to come for cryptocurrencies, or it could be yet another failed attempt.
Bitcoin at this point is more of value that people store than a currency people want to use.
However, the more BTC penetration grows, the easier it will be for an actual mass-adopted cryptocurrency to break into the market.
And that alone is reason enough for excitement.