Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
Analysts from JPMorgan have suggested that Bakkt is largely the reason why Bitcoin price fell below $8,000 last week. Even though activity has picked up a bit, the market is still a little discouraged.
After quite a long period of incubation and regulatory pursuits, the Intercontinental Exchange (ICE), eventually launched its Bakkt’s Bitcoin futures contracts last week. The platform had always been heralded as the main ingredient that will serve as the proper Bitcoin catalyst but has failed so far. In fact, a day after Bakkt officially launched, Bitcoin shed almost 20% of its weight and dropped to $8,000 price level for the first time in months.
Now Bloomberg reports that analyst from JPMorgan, believe that Bakkt was the major reason for Bitcoin’s drop from glory.
The market’s leading digital asset shockingly lost about $2,000 of its value and along with some major hodler’s decision to let some of their holdings go, the launch of Bakkt’s futures contracts most likely had a lot to do with the event. According to the JPMorgan team headed by Nikolaos Panigirtzoglou:
“It may be that the listing of physically settled futures contracts (that enables some holders of physical Bitcoin e.g. miners to hedge exposures) has contributed to recent price declines, rather than the low initial volumes.”
Apart from the fall in prices, it’s also been noted that even with all the anticipation that Bakkt had, the platform didn’t do nearly enough numbers and seemed to disappoint the market. On the first day, for example, only about 72 Bitcoins (BTC) were traded in around 105 total contracts. On the second day, there were 217 contracts and compared with other platforms, Bakkt’s numbers are extremely disappointing as the Cboe’s first day saw 3,969 BTC while the CME had 5,270 on its own first day.
However, Bakkt’s performance so far might not be too strange when compared with the CME. Back when the CME Group first launched of its cash-settled Bitcoin futures in 2017, the market also did not respond favorably, and by the end of December, a very long cryptocurrency bear market began.
Furthermore, the fact that BTC is not doing so great at the moment should still take nothing away from the king coin. The cryptocurrency market is extremely volatile and has been known to rise and fall quite shockingly, to the surprise of even the most experienced price analysts and experts.
Secondly, even at its current price which is just a little above $8,000, Bitcoin on January 1, was trading between $3,000 and $4,000. This means that even as disappointing as Bitcoin currently is, it still has had a $140% year-to-date return on investment.
Regardless of all this bad press, there are still quite a lot of people who are considerably bullish on Bitcoin’s overall chances. Many still believe that it’s a little too early to be sure that Bakkt will not have any effect on the market or has been a failure. Others have also taken this time to encourage would-be traders on the age-long practice of buying into the market when prices are down.