Bakkt Explained – How important is it? Could it create another bull market?
Intercontinental Exchange explained
Intercontinental Exchange (ICE) is an American company that owns exchanges for financial and commodity markets, and operates 23 regulated exchanges and marketplaces. This includes ICE futures exchanges in the United States, Canada and Europe, the Liffe futures exchanges in Europe, the New York Stock Exchange equity options exchanges and OTC energy, credit and equity markets.
In 2017 ICE had revenue of US$ 5.83 billion with total assets worth US$ 78.26 billion. They currently have just under 5000 employees
The most famous subsidiary of ICE is the New York Stock Exchange (NYSE). It is by far the world’s largest stock exchange by market capitalization of its listed companies at US$21.3 trillion in 2017. The average daily trading value was approximately US$169 billion in 2013 and is probably more now.
In August 2018 Intercontinental Exchange announced that it planned to form a new company, Bakkt, which is intended to leverage Microsoft cloud solutions to create an open and regulated, global ecosystem for digital assets.
The new company will work with a marquee group of organizations including Boston Consulting Group (BCG), Microsoft, Starbucks, and others, to create an integrated platform that enables consumers and institutions to buy, sell, store and spend digital assets on a seamless global network.
The Bakkt ecosystem is expected to include federally regulated markets and warehousing along with merchant and consumer applications. The first use cases will be for trading and conversion of Bitcoin versus fiat currencies since Bitcoin is the most popular cryptocurrency.
Good for investors and demand
Bakkt’s platform enables institutional investors to buy Bitcoin via a regulated market infrastructure. Every ETF, money manager or financial institution needs to invest in Bitcoin safely and regulated market infrastructure offers that unlike most normal exchanges.
Bitcoins will be physically-backed which is different than futures since those don’t have physical backing. This means that if people buy Bitcoin futures it’s just the equivalent of the BTC value in fiat. With Bakkt the Bitcoin futures contract will be physically delivered versus fiat currencies, including USD, GBP and EUR.
This means increased demand meaning when institutions begin investing Bitcoin with Bakkt, the actual Bitcoin is removed from the market. As a result it should driving price higher as supply diminishes and contributing to the overall market cap.
Real life usage
The investing is just a one aspect of the Bakkt. On top of that they are building a platform to enable consumers and institutions to buy, sell, store and spend digital assets seamlessly.
Real life usage is the biggest issue that cryptocurrencies are currently very difficult to use and spend in real life. It is also very difficult for an average user to get into cryptocurriences – buying first cryptocurrency and then storing them is not that easy for an average user.
If Bakkt is able to create a global network where users can easily buy, store and spend cryptocurrency it would increase the value of all cryptocurrencies tremendously since new users could purchase it and old users could use it. To achieve that Bakkt would need partnerships however.
To achieve that goal Bakkt managed to secure some significant partnerships:
Starbucks which is an American coffee company and coffeehouse chain with revenue of US $22.387 billion and over 238k employees. They are one of the leaders in mobile retail transactions. They have gift cards and mobile app payments – cryptocurrencies seems to be perfect use cases.
Microsoft is providing services for the system so it is unclear how much they will use the system but I wouldn’t be surprised if they tried to be involved more.
The other partnership is BCG – Boston Consulting Group is a American multinational management consulting firm with 90 offices in 50 countries with Revenue of $6.3 billion and around 16k employees. Huge partnership but unclear how far it goes.
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