Bitcoin Investment

Bakkt Will Trade ‘Pre-Funded’ Bitcoin – Not Paper Claims, CEO Confirms

Georgi Georgiev | Aug 21, 2018 | 09:00

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Bakkt, the digital asset platform announced a couple of weeks ago, won’t support margin trading, according to its CEO. The solution will aim to facilitate institutional investment, providing the much-needed infrastructure for it.   

Bakkt Not Like the Rest

Bitcoinist reported August 3 that the owner of the New York Stock Exchange (NYSE) – the Intercontinental Exchange (ICE) is teaming up with marquee companies among which Starbucks, BCG, and Microsoft, to create a new digital asset platform geared to solve much of the current industry issues.

Yesterday, Bakkt’s CEO, Kelly Loeffler, outlined the major principles that the platform will be built to accomplish: an infrastructure for institutional investments, transparent and efficient price discovery, and a consistent regulatory construct.

According to Loeffler, Bakkt will be essentially different than existing cryptocurrency exchanges because of the physical delivery. She notes that the buying and selling of bitcoin 00 will be fully collateralized or it will be pre-funded.

With our solution the buying and selling of bitcoin is fully collateralized or pre-funded.

Our new daily bitcoin contract will not be traded on margin, use leverage or serve to create a paper claim on a real asset.

— Bakkt (@Bakkt) August 20, 2018

The Bakkt platform will focus on a consistent regulatory construct, transparent, efficient price discovery, and an institutional quality pre- and post-trade infrastructure. The efficient price discovery, in particular, will be bolstered by physical delivery. In other words, actual bitcoins will be traded unlike Bitcoin futures available on the market today.

“Specifically, with our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded,” Loefffler explained.

Loeffler notes:

As such, our new daily Bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset. This supports market integrity and differentiates our effort from existing futures and crypto exchanges which allow for margin, leverage and cash settlement.

So Far So Good

The publication of Bakkt’s CEO is in line with what experts have been expecting and also hoping for. Earlier this month, Fundstrat’s Tom Lee also outlined a few important differences between the upcoming digital asset platform and existing solutions like Coinbase and Binance.

He emphasized on the 1-day futures contracts which are physically delivered, much like the highly-anticipated commodity-backed bitcoin ETF proposal of VanEck/SolidX that’s pending SEC approval.

Other experts have also spoken up, outlining the tremendous importance of physically-settled bitcoin futures. According to Garret See of the DV Chain investment firm, this would facilitate better arbitrage trades and it would make trading a lot less risky.

Bakkt’s digital asset platform is set to begin functioning in November.

What do you think of the physically-delivered bitcoin futures contracts? Don’t hesitate to let us know in the comments below!

Images courtesy of Shutterstock, Medium.com