Today I will discuss an important fundamental news related to the most important cryptocurrency of our times, which is Bitcoin. According to the magazine Forbes, Bitcoin has been proved as one of the best investments of all times.
This article will explore advantage of the programmed launch of BAKKT. BTCUSD exchange rate stands at 10,247 USD according to Coingecko.
What is BAKKT?
Bakkt is a BTC futures Exchange and digital assets platform established by ICE in 2018. ICE is a parent company of the heart of financial western world – NYSE or commonly known as Wall Street. (Coindesk.com)
When will be Bakkt launched?
Bakkt will launch its services next week on September 23rd after it got approval from the regulators. Bakkt is the first company which will bring Bitcoin futures to our world. (Theblockcrypto.com)
The BAKKT has an advantage, it’s targeted to institutional investors. Cryptocurrencies are currently limited because of market infrastructure and the latest regulatory uncertainty, which causes lower trading volumes or less liquidity.
We have to remember that after Libra hearings, some crypto investors got a little bit scared when governments started to promoted hostile or tough regulations toward crypto, which is the case of India for example.
So Bakkt announced daily and monthly future price margined futures for bitcoin which forms a part of the futures contract.
One disadvantage of today’s crypto market is that the price of each cryptos meaningfully varies from one exchange to another. This aimed to be solved by BAKKT futures BTC contract, where the price settlements will be as a result of future contracts. This will protect investors against anti-money laudering practices for example. This will start to avoid costly fees when you transfer Bitcoin from one address to another, or security related issues. (Medium.com/bakkt-blog)
So what is a futures contract?
According to Investopedia: “A futures contract is a legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future.” (Investopedia.com)
The definition of course is larger but I don’t wanna confuse you. So for example United States will buy oil to Brent Oil producers. They settle in August the price of Brent Oil for December 2019 at 63.19 dollars. Why they do it?
Oil prices spikes may negatively affect economic growth. Let’s suppose that there is some problem at Persian Gulf in 2 months, and in November the oil soars to 90 dollars. This contract will protect the buyer to get the oil at fair price. However these problems, will increase the value of Brent oil future for March. It can have advantages for the times when the oil increases but in case that the price of oil decreased to 40 dollars, it would have the opposite effect because the buyer would be forced to pay 63 dollars due to the nature of the contract.
The similar thing will apply for Bitcoin. It will protect Bitcoin holders against the sharp and dramatic effects of crypto winters like those we had in 2018.
What are the benefits of Bakkt custody?
“Bakkt and ICE Futures U.S. are bringing federally regulated price discovery to bitcoin markets. Fueled by the same technology and expertise that powers ICE’s global markets, the Bakkt Bitcoin Daily and Monthly Futures contracts enable physical delivery through secure, regulated custody.”
Bakkt basically means that your Bitcoins will be stored within the top security environment regulated by New York State Department of Financial Services.
Bakkt is custom made for institutional market participants. It will count on simplified and pro trading connection, it will count on top level surveillance – something similar to the environment of financial institutions.
There is an insurance policy which may protect cryptoholders’ assets up to 125 million dollars from a leading syndicate. (Bakkt.com)
How would it affect the price of Bitcoin?
There are different point of views. Some people fear that Bitcoin price will be negatively affected by it or there may be the opposite case because of the mechanism Buy the rumor, sell the news – expecting the positive outcome for Bitcoin. But in some occasions the effect isn’t even that important.
These effects depend in my opinion on the current nature of Bitcoin trend vs US dollar. At this moment, Bitcoin is being traded sideways. Let’s remember that Bitcoin on February hit its lows of 3,200 USD and at the end of June, it peaked at around 13,900 USD. In the last 3 months its value was within the range between 9,400 USD and 13,200 USD. I don’t like side way markets – they are boring for the traders but on the other hand BTC after its spectacular growth is resting probably to pick some steam. A lot of us are expecting and wishing deeply the return of the King – or another bull run, but IMHO Bakkt is another piece of fundamental analysis for Bitcoin – of course it’s a great news and a very important one, but its value will be mostly defined by Technical Analysis patterns. (Cointelegraph.com/news)
Conclusion
BAKKT is a very important news for Bitcoin. It will promote more security, reliability for holders as well as higher trading volume and will help to establish Bitcoin price in a different way – more similar to some commodities assets. I prefer that we remain cautious, and definitely watch closely Bitcoin’s price.
So Kudos for Bitcoin and Bakkt!
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Sources:
- https://www.coindesk.com/information/what-is-bakkt
- https://www.theblockcrypto.com/post/36357/bakkt-confirms-september-launch-date
- https://www.investopedia.com/terms/f/futurescontract.asp
- (https://www.bakkt.com/publicdocs/Bakkt_overview.pdf)
- https://medium.com/bakkt-blog/putting-bakks-bitcoin-futures-to-the-test-47e381b7dda1
- https://medium.com/bakkt-blog/putting-bakks-bitcoin-futures-to-the-test-47e381b7dda1
- https://cointelegraph.com/news/bakkt-soft-launch-stalls-bitcoin-price-buy-the-rumor-sell-the-news
- https://pixabay.com/es/photos/bitcoin-criptomoneda-digitales-2007769/