The long-awaited crypto derivatives platform Bakkt, first announced almost a year ago in early August 2018, has finally begun testing its flagship product – Bitcoin Futures.
Bakkt is the brainchild of the Intercontinental Exchange (ICE), an American Fortune 500 company that operates several exchanges around the world, including the New York Stock Exchange (NYSE). According to the original press release, Bakkt is “designed to enable consumers and institutions to seamlessly buy, sell, store and spend digital assets. Formed with the purpose of bringing trust, efficiency, and commerce to digital assets, Bakkt seeks to develop open technology to connect existing market and merchant infrastructure to the blockchain”.
The program has met with several hiccups along the way though, including gaining regulatory approval from the Commodity Futures Trading Commission (CFTC). In April, the ICE purchased a cryptocurrency custodial service called Digital Asset Custody Company (DACC) as a means to try secure CFTC approval. Trusted custody solutions have become a key factor in gaining approval from regulators as an increasing number of crypto exchanges are found to lack sufficient coverage for customer funds.
User Acceptance Testing (UAT)
Yesterday, the official Bakkt Twitter account announced the launch of user acceptance testing for Bitcoin Daily and Monthly Futures contracts:
“Today kicks off user acceptance testing @ICE_Markets for the Bakkt Bitcoin Daily & Monthly Futures contracts. Testing is proceeding as planned with participants from around the world”
The original announcement was met with excitement in the crypto community with the promise of delivering a wave of institutional investment into the market. However, over time investors have grown weary of waiting, with many beginning to question the benefit of institutional investment. Many crypto traditionalists are concerned that the move will simply hand over the industry to the very bankers it was designed to replace.
Previously, institutional investors were only able to trade cryptocurrency as derivatives, using fiat money to bet against products which tracked the asset price. Now, however, Bakkt will deliver ‘physical’ assets to its customers via a process called ‘warehousing’. This means that for the first time, large corporate investment companies can become the sole owners of their cryptocurrency and the associated private keys.
The cryptocurrency market has not experienced a particularly positive reaction to the news, with the majority of coins in the red today. Bitcoin (BTC) is down 4.49 percent at $10,138, Ethereum (ETH) is trading at $213.90, down 5.32 percent and XRP is down 4.29 percent at $0.31 a coin.