Bakkt Commences Bitcoin-Futures Trading
After a 13-month run-up, ICE Futures US has debuted trading of the physically settled Bakkt Daily and Month Bitcoin Futures.
Each contract is for one bitcoin and settles via the Bakkt Warehouse, a qualified custodian that is regulated by the New York Department of Financial Services.
The Intercontinental Exchange is the third designated contract market in the US to launch bitcoin futures. Cboe Global Markets and the CME Group began their respective cash-settled bitcoin futures contracts in mid-December 2017 before the Cboe ceased adding new bitcoin futures contract in March 2019.
“Bakkt, and other exchanges like this, are all great for the market,” Scott Freeman, a founding partner at JST Capital, told Markets Media. “It makes it easier for those who have the interest to access the markets and get introduced to it when they might not have a way to do it otherwise.”
Those who need to hedge their positions, such as miners, payment processors, and crypto hedge funds, may find Bakkt’s physical settlement attractive, according to Richard Johnson, principal, market structure and technology at Greenwich Associates.
“The CME’s cash-settled futures were more of a speculation tool,” he said. “The daily contract can almost be considered a spot market.”
It is too soon to know if the new market will expand the liquidity of bitcoin futures or redispute it amongst the growing number of CFTC-regulated DCMs.
“I hope they are successful,” said Freeman. “It would be good for the overall ecosystem, but it is far too early to tell since the market evolves so quickly and there is so much competition in this space. We hope they are successful so that they increase the pool of liquidity.”
Greenwich’s Johnson doubted that Bakkt’s launch would put additional pressure on Nasdaq, which is the only major US exchange operators without a bitcoin-futures offering, to bring one to market.
“When the time comes, they will likely have a number of acquisition options,” he said.
In other crypto-derivatives news, the CME Group expects to launch options on its bitcoin futures contracts in the first quarter of 2020, pending regulatory review.
The exchange operator plans to target its new offering to institutional investors and professional traders who want to manage their exposure to the bitcoin spot market as well as hedge their bitcoin futures positions, according to Tim McCourt, global head of equity index and alternative investment product, at the CME Group.
The Bitcoin Capital Active ETP has listed on the Swiss stock exchange.
Since last December volumes from top tier exchanges have continued to increase.
The Boerse Stuttgart subsidiary has operated as a custodian of cryptocurrencies for more than a year.
Many of the issues are common to the regulation of traditional securities trading venues.
Blockchain-traded funds await SEC approval.