Text | Aloe Editor | Lu Xiaoming

Odaily（ID：o-daily）

This marks the launch of the first physically-deliverable bitcoin futures product compliant with US regulations.

This transaction came "too late" for Bakkt. In August last year, ICE Intercontinental Exchange announced plans to establish a subsidiary Bakkt, which fired a high-profile shot at Wall Street's coveted cryptocurrency market. At the beginning of its birth, Bakkt received US$183 million in financing from 12 top institutions including Li Ka-shing's Horizons Investment, Tencent's largest shareholder Naspers, Microsoft Ventures M12, and Goldman Sachs Galaxy Digital, with a valuation exceeding 740 million Dollar.

In ICE's ambition, Bakkt will be a brand new platform that provides digital asset trading, storage and payment services for financial institutions, commodity traders and consumers. At that time, Bakkt also had the aura of "Cryptocurrency New York Stock Exchange".

However, since Bakkt's first futures product needs to gather three licenses including trading (DCM), clearing (DCO) and custody, its launch has been postponed three times since it was announced.

In August of this year, Bakkt announced on its official blog that it was approved by the New York State Department of Financial Services (NYDFS) and the New York State Trust Licensing Regulatory Approval. It officially won the last custody license and finally ended its one-year bounce career.

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Wall Street running out of steam? Bakkt's poor performance on the first day

How is Bakkt doing?

Bakkt's Bitcoin (USD) futures products are divided into daily contracts and monthly contracts. Two and a half hours after Bakkt was launched, Bakkt showed that 8 transactions had been completed, and 8 bitcoins had been traded, and it is still growing. As of 5 pm, 28 bitcoins had been traded.

Eight transactions in two and a half hours, and a total transaction volume of about 8 BTC, are obviously far from the expectations of "Wall Street funds bursting into the bank" in people's minds; in contrast, CME Bitcoin futures are in Its transaction volume in its first week was $460 million, and its current transaction volume is about $700 million.

In addition, despite the aura of "bull market light", the spot market of Bitcoin does not seem to buy it, and the reaction is flat. As of press time, the price of Bitcoin has only increased by 0.5% to about 9,950 US dollars. Recently, Bitcoin has hovered around $10,000 for several months.

The failure of high expectations led to the emergence of many negative voices. Some pessimistically lamented that "Bakkt has exhausted all its benefits", "Professional institutions will have faith in Bitcoin? Stop dreaming.", "It lasted for a year. Some people joked, "Will Wall Street take over the deal for us?", "The real trading volume in the currency circle is all in Bakkt?", "It's time to release the old leek raised by Master Bao in the United States."

In fact, the above speculation is not without reason. The waning enthusiasm for Bakkt may be one of the reasons why Bakkt performed poorly on the first day. After all, since the first announcement at the end of 2018, with the continuous delay of the launch time, the cryptocurrency community's sentiment towards Bakkt has transitioned from high to calm, and there is no lack of patience to run out.

Yesterday, cryptocurrency analyst Alex Kruger conducted a poll of 2,777 people on Twitter, and the test found that those who think Bakkt will be hit and those who think Bakkt will not be hit are evenly split: 49% of people voted “yes” Fail," while 51 percent voted "Success."

But what is more noteworthy is that Bakkt's main customers are also regarded as institutional funds that are most likely to bring new upgrades to the cryptocurrency market this time. Where did they go? Maybe still on the sidelines.

Prior to this, Odaily was in "Can Bakkt, the exchange invested by Li Ka-shing, really allow Wall Street to buy Bitcoin?"The article pointed out that although Bakkt is expected to solve the problems of compliance and custody, Bakkt cannot change the interest of traditional investors in encrypted digital currency. Value, or the inability to calculate intrinsic value with traditional valuation methods, has caused many investors to "do not understand", or think that the margin of safety of their investment is extremely low, which makes them uninterested.

In addition, the expected optimism about the entry of institutional funds is also the reason for the failure of this expectation.

Although the recent frequent actions of institutions are considered to be the biggest driving force for the recovery of the digital currency market in 2019, according to Binance Exchange CEO Changpeng Zhao, retail investors still play a key role in driving the price of Bitcoin to rise sharply, and do not look forward to it. While institutional and retail transactions on Binance are growing at a faster rate, retail accounts for about 60% of trading volume, about the same as last year.

Zhao Dong, founder of DGroup and shareholder of Bitfinex, also told Odaily that the entry of institutional funds is not as optimistic as we imagined. He said that based on his observation and experience in the OTC market, when a large amount of incremental funds enter the market, the huge amount of funds often does not ask about the price. A 10% premium is called a bull market. The current wave is the so-called family office, which is a small amount of asset allocation for encrypted assets, and there is no resonance in the entire market.”

However, there are still voices that do not need to amplify the sluggish initial trading volume.

Todaro, director of research at institutional trading tools provider TradeBlock, is optimistic: “As the digital currency space continues to mature and over time, we should see increased trading volumes for these products relative to spot.” However, he also expressed demand will not increase immediately.

But this can be seen as a positive start. The current Bakkt transaction volume is about one BTC per hour. If this speed continues, a lot of transactions can be completed in a month.

Su Zhu, co-founder and CEO of Three Arrow Capital, is also optimistic that things will eventually change.

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Bakkt still not to be underestimated

Even if the performance on the first day is not good, but at present, as the best hub linking the cryptocurrency industry and the traditional financial industry, Bakkt's future is still promising.

Compliance is the most obvious advantage of Bakkt. The credibility of ICE, coupled with its compliant physical delivery products, has created a compliant channel for the entry of traditional institutional funds, which will encourage those who want to invest in Bitcoin but have no compliance Institutions with regular investment channels participate in the Bitcoin market.

In addition, Bakkt's progress on the road to compliance, especially in custody services, not only provides a successful model for competing products to launch physical delivery futures products. Currently, LedgerX and ErisX, which is supported by TD Ameritrade, are planning to launch the same physical delivery contract as Bakkt.

Also paved the way for the launch of a Bitcoin ETF. Previously, the US Securities Regulatory Commission SEC had repeatedly rejected the application of the Bitcoin ETF because it could not confirm that the custody of Bitcoin and the market price were not manipulated. In June of this year, SEC Chairman Jay Clayton reiterated the prerequisites for approving Bitcoin ETFs: "Custody is the main problem, how does the SEC really know that investors own digital assets?"Currently, Bakkt's forthcoming custody service is transparent and safe, which meets regulatory requirements for Bitcoin ETF custody and removes the biggest obstacle for the launch of Bitcoin ETF.

But compliance is not everything. Both CBOE (Chicago Options Exchange) and CME (Chicago Mercantile Exchange) launched at the end of the last bull market are compliant exchanges, but because none of their products have physical delivery, they can be shorted without Bitcoin, which also speeds up the next year The arrival of the big bear market.

In contrast, short selling is no longer an unlimited Bitcoin futures product that can be physically delivered every day, which is the cornerstone of its trust given by institutions. After all, traders must have a sufficient amount of physical bitcoins to support the day's transactions, thus greatly reducing the possibility of market price manipulation.

In addition, the prosperity of Bakkt futures has also formed a long-term positive for BTC prices. BMan, the founder of Metropolitan Capital, said: "This mechanism means that it is more difficult for institutional funds to short than to go long, because no matter whether you are long or short, you need to prepare Bitcoin physical margin, and the currency in hand will depreciate when you are short, and you are shorting your own position. "

However, Bakkt's performance today has also reduced a lot of "fire" for this year-long high exposure. For investors, perhaps they should realize that the bull market is not as violent as we imagined.