Bitcoin dove more than $1,000 in price just one day following Bakkt's big bitcoin futures trading launch.
The Intercontinental Exchange (ICE) launched physically-settled bitcoin futures trading through its Bakkt platform on September 23. As the dust settles from the big unveiling, the public is left to wonder what impact the product will have on the crypto space in the days ahead. Only one day after the product’s launch, bitcoin dumped more than $1,000.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Bitcoin saw a stark drop in price on September 24, falling from $9,700, down to levels below $8,200, according to TradingView.com’s CoinBase price chart.
Bitcoin’s price also plummeted after the Chicago Mercantile Exchange (CME) launched its cash-settled bitcoin futures product in December 2017. The day after CME’s December 18 launch, bitcoin’s price fell from $19,000, down to below $17,000. The asset continued to tumble further in the following days, reaching prices below $4,000, before seeing a crisp price run up past $13,000 in 2019.
Even though bitcoin’s price has fallen drastically since, Bakkt’s bitcoin futures launch saw multiple positives, a Bakkt spokesperson detailed to me in an email.
“On the first day of trading on ICE Futures U.S., there was strong industry participation in Bakkt Bitcoin Futures and the [October 2019] monthly contract had the tightest bid-offer spreads in the market, which was an exciting achievement. As the only end-to-end regulated market for digital assets, Bakkt Bitcoin Futures will play a key role in bringing greater price discovery and risk management to the [b]itcoin market.”
Expert research company Gartner views the development as a step forward for bitcoin. Bakkt’s product, as well as the CME’s recent news regarding its plans to up its bitcoin futures trading maximums, “signifies the gradual maturity of the [b]itcoin trading market for mainstream institutional investors and their regulators,” Gartner Inc. distinguished research vice-president Avivah Litan said to me in an email.
ICE, “the parent company of the New York Stock Exchange (NYSE),” originally “planned to open its futures exchange in 2018,” a CoinDesk report said. Named Bakkt, the exchange touted bitcoin futures settled with real bitcoin instead of the cash-settled futures seen in CME trading. The product, however, saw postponement several times, leading to a September 23 launch.
Additionally, on September 12, CoinDesk broke the news of CME’s filing with the Commodity Futures Futures Trading Commission (CFTC) to let traders of its cash-settled bitcoin futures product manage positions twice the size of current limits.
Bakkt’s new bitcoin futures trading had a bit of a sluggish kickoff, according to an article from CoinDesk, although, Litan sees the product, as well as CME’s contract limit increase, as an overall step in the right direction.
“Over time, this will legitimatize the cryptocurrency trading market which could potentially have a positive effect on [b]itcoin values, especially during a global economic slowdown and negative interest rate environment as investors and traders seek alternative instruments to equity and bonds. But [b]itcoin is certainly still a risky speculative investment and there is no guarantee that these initiatives will make that much difference to its value, trading volume and adoption.”
Litan also touched on a key point concerning the manner in which customer’s bitcoin will be held. “One of Bakkt’s value propositions is the cryptocurrency custodial services it provides to its customers, which should help increase trading activity around [b]itcoin,” the analyst said. “Without such custodial services, [b]itcoin investors have to manage their own [b]itcoin access security and private keys, which is a serious impediment to adoption today.”
Litan concluded, “[T]he Bakkt launch is certainly a positive step for institutional trading in [b]itcoin – but by no means does it translate into a certain financially-successful future for [b]itcoin and [c]ryptocurrencies.” The analyst added, “For that, only time will tell.”
Disclaimer: I actively trade cryptocurrencies, as well as hold a small amount of BTC, ETH, LTC, XMR, NEO, ZEC, BEAM, BCH, DASH and various insignificant other altcoin positions