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Bakkt platform was finally launched in September 2019 only to be greeted by a very lukewarm response from investors but analysts from Oppenheimer & Co think that it is too early to write it off.
The much-anticipated Bakkt platform was finally launched last month. However, it was not all pomp and color in that world once trading started on this platform. As we highlighted earlier, the Bakkt Bitcoin futures contracts saw very lukewarm response from investors. With one week since its launch, the Bakkt futures contracts have just $5 million in total trading.
Bakkt Futures contracts created a lot of buzz in the crypto market before its launch. The contracts were expected to drive institutional interest in the crypto market. Nonetheless, things have not turned as expected until now. In spite of the disappointingly slow start, various analysts from Oppenheimer & Co. said that it is too early to write off Bakkt.
The equity research firm published a research note on October 1. In that note, it encouraged investors to remain calm amid the lackluster trading volume of Bakkt. Notably, Intercontinental Exchange, its parent company, has many other electronification initiatives in mortgages and exchange-traded funds (ETFs), and fixed income analytics and trading. The research note was written by Oppenheimer managing director Chris Kotowski and senior analyst Own Lau.
For the first five days of trading, Bakkt’s average daily futures volume was 125 contracts with each of them for one bitcoin. That is a pale shadow compared to the 2017 debut of bitcoin futures on CBOE where the first month’s volume was 4,000 contracts. Also, CME did better since there were 500 contracts for 5 bitcoin each bringing that cumulative total to 2,500 bitcoins.
As opposed to those two Chicago exchanges’ bitcoin futures that operate as side-bets on the direction of the underlying asset’s price paid out of cash, Bakkt’s settlements feature actual bitcoin. The note said:
“At this point, we are not going to judge whether Bakkt’s bitcoin futures will be successful or not, or whether the trading volume of Bakkt’s bitcoin futures will increase in the future.”
The analysts are aware that the mass adoption of bitcoin and other digital assets outside of crypto enthusiasts has a long way to go. However, investors should not discount that the first bitcoin futures trading volume that got introduced by Bakkt never seemed to meet the original expectation.
The note goes on to point out that since the first-month CBOE’s average daily volume has been deteriorating. The drop in daily volume made the platform to stop listing bitcoin futures in June 2019. On the other hand, CME’s average daily volume has been increasing and had reached 7,000 in July 2019.
These analysts also suggest that Bitcoin may not be the virtual token that gains mass adoption. Thus, ICE and CME are ready for the emergence of digital assets. They will consider only those assets that have set up the right infrastructure in place. The research firm highlighted CME’s plans to release bitcoin options in Q1 2020. That will act as fundamental proof that there is still some interest from institutional investors in these alternative financial instruments.
Bakkt and Crypto Market Relations
When Bakkt was first announced in 2018, the whole crypto space welcomed it as a great addition to the sector. There were great hopes that it will have adequate power to propel the industry significantly higher. Nonetheless, though some think it is still too soon to judge, the first week of Bakkt’s launch was not encouraging.
As we reported earlier, the overall market dropped in valuation in response to Bakkt’s weak first day. Bitcoin has lost over 17% since then and the altcoin markets are performing worse than the flagship token. JPMorgan analysts think that Bakkt was the primary cause for Bitcoin’s drop from glory.
Is it too soon to judge the newly-launched Bakkt platform or is it doomed to fail? Time has all the answers.