Cryptocurrency Derivatives Series: Heads-up on Bakkt’s Launch of BTC Futures in Q3

The ICE-backed start-up, Bakkt’s beta-testing for its much-anticipated Bitcoin futures contracts went through successfully in the recent past as per the announcements of Mr. Adam White, the COO of cryptocurrency platform Bakkt.

Bakkt has diligently initiated user acceptance testing for its bitcoin futures listed and traded at ICE Futures U.S. and cleared at ICE Clear US.

Bakkt’s collaboration with the ICE’s leading futures exchange and clearing infrastructure to bring physical delivery futures contracts to market participants in 30 countries.

They are now gearing up for the launch date for its Bitcoin (BTC) futures project in 3rdquarter owing to the pending of approval from the New York Department of Financial Services (NYDFS), as per a recent report by The Block.

The launch is all set to go in Q3, once a custody solution is approved:

slide deck obtained by the media outlet states that the New York-based company is still waiting on approval from the New York Department of Financial Services (NYDFS) to run Bakkt Warehouse, which would enable the company to function as a limited-purpose trust company and operate as a qualified custodian for the physical bitcoin underlying its bitcoin futures contracts.

While the company is still waiting for approval of its custody solution, it is reportedly already able to provide the infrastructure needed for investors to receive and deliver bitcoin for U.S. dollars in standardized settlement cycles in a regulated and compliant manner. The physically-settled bitcoin futures contracts will trade on ICE Futures U.S. and be cleared by ICE Clear U.S.

Bakkt intends to unveil two bitcoin futures contracts (subject to the regulatory approval of Bakkt Warehouse): 

  • Bakkt ™ Bitcoin (USD) Daily Futures Contract
  • Bakkt ™ Bitcoin (USD) Monthly Futures Contract

The daily bitcoin futures will enable traders to transact in a same-day market while the monthly futures will provide traders with the ability to trade the front month and across the forward pricing curve. 

Bakkt’s Q3 launch plans were confirmed by ICE CEO Jeffrey Sprecher on an earnings call, when he said, “Subject to final regulatory approvals, we plan to launch our physically-settled bitcoin futures in the very near future.”

On the back of these latest developments, Sam Doctor, who is a renowned strategist for the Fundstrat Global Advisors, has stated that the budding start-ups like Bakkt and LedgerX’s would be the luring factors for the institutional demand for Bitcoin and other cryptocurrencies. The start-up clarified through twitter handle about its intentions to unveil two futures contracts with daily and monthly settlement periods. The price discovery of these contracts would not depend on unregulated spot markets, with an objective of cut down the apprehensions of wash trading. Bakkt’s new products would be operating contemplating prices discovered in their physical delivery contracts.

The mechanism is available for all the US-based investors with government IDs, whether they are institutional clients or HNIs. Most analysts reckon the advantages that these physically-settled futures contracts are exclusively meant for institutions in the crypto markets.

Overall, the crypto veterans reckon that the highly anticipated Intercontinental Exchange-backed platform will attract new flows of institutional money into the industry. Courtesy: BNC

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