For the crypto industry, the last year bought interesting developments that will influence the space in the upcoming years.
One of the recent advancements includes the emergence of cryptocurrency derivatives. Leading this market is a new institution namely Bakkt, a venture created and backed by a well-established group of organizations.
While the concept of bitcoin futures existed since 2017, Bakkt has made it more popular and mainstream. The venture is led by Intercontinental Exchange (ICE), the same group that operates and manages the New York Stock Exchange (NYSE).
Bakkt was launched in August 2019 after the US Commodity Futures Trading Commission granted its approval. With the service of providing ‘physically-backed’ bitcoin futures contract, Bakkt has attracted a plethora of institutional investors into the cryptocurrency space.
In the last month of 2019, the exchange recorded a trading volume close to $50 million in a single day. A month back it has launched two new products- cash-settled bitcoin futures and options. This step also makes the exchange first in the line to provide regulated bitcoin options.
Following the suit of its parent company, the Bakkt derivatives list now includes bitcoin futures as well as bitcoin options. The addition of bitcoin options opens flexibility to the derivates market as the users hold the ‘right’ to trade bitcoin at a predetermined price in the span of 30 days. Furthermore, the inclusion of cash-settled bitcoin futures allows investors to settle the contract with fiat currency, instead of the underlying asset; that is bitcoin. Bakkt derivatives market has overall given a traditional makeover to the digital assets market.
Derivatives are a significant feature in the global financial system. By including it into the cryptocurrency field, they enable innovative strategies and inclusion. Cryptocurrency derivatives would bring in a range of institutional and retail investors. The wider adoption of cryptocurrencies along with these factors has captured the interest of prominent service providers. This had led to an array of players opening their doors to cryptocurrency derivatives.
Delta Exchange is one such platform facilitating cryptocurrency futures. Along with bitcoin, it offers trading for 19 other leading altcoins. Apart from futures contracts on bitcoin and other leading altcoins, the exchange also offers perpetual swaps. The exchange offers 100x leverage on Bitcoin & Ether futures, 50x on Ripple and 20x on other altcoin perpetual contracts. All derivative contracts on this platform are settled in either BTC or USDC. Other established cryptocurrency exchanges that include BitMex and Deribit have also started offering digital asset derivatives.
Another example is bitcoin derivatives trading platform MobyTrader that enables non-professional option traders access to crypto option exchanges like Deribit, Quedex, and more. The company simplifies the very complex derivatives to the fingertips of every novice mobile option trader. MobyTrader is accessible from Google and iOS App and Play stores. That is not to mean that trading is easy. It takes a lot of practice, a steep learning curve that takes time to perfect with shifty solutions. Paul B De Groot, CEO of MobyTrader, said: “This product is not a game. It’s about making money by option trading”.
The newfound interest in derivatives seems to be one of the trends of this year in the cryptocurrency market. Cryptocurrency derivatives are one of the factors that will allow crypto to go mainstream. Moreover, the onset of regulatory platforms allows a range of investors, including hodlers and everyday traders, to invest in digital assets. In turn, this would also increase the flow of liquidity into the market and thus market capitalization.
Bakkt’s leadership was handed to Adam White, the man behind Coinbase’s accredited success. Additionally, Mike Baldina, who has been previously associated with companies like PayPal and Google have also joined this institution.
Besides this, Bakkt also plays a hand at developing bitcoin into a mainstream payment method. It has already planned to roll out a consumer-facing app that will enable consumers to make payments using bitcoin. The app that is expected to be launched in the first half of 2020 has already secured its first major partner in the form of coffee giant Starbucks.
The new additions suggest that Bakkt is indeed trying to innovate and expand in the cryptocurrency space. Moreover, the efforts imply its intention of becoming a crypto-fiat exchange giant.
However, becoming a leading player also comes with new demands so we can try to predict what will be their next moves.
Bakkt is primarily a physically-backed bitcoin exchange. This further indicates that it would need a steady stream of bitcoins to provide efficient service on its platform. Catering to a wider group of institutional investors, it would become imperative for Bakkt to innovate by strategically partnering or affiliating with other operators. They need an insane amount of crypto enthusiasts and those who are not only hodl bitcoins, but actively use and trade them.
We can see that their only solution is to look for a big amount of partnerships with those who can constantly nurture their needs fro users and constant flow of bitcoins. And the main source of such cooperations will be from instant or options crypto exchanges.
So the exchange requires partners who would bring retail clients that regularly deposit and trades BTC.
The main reason why such trading platforms can make a difference for Bakkt is the ease, convenience, and the access that they present. Most of these exchanges require little effort to register. Minimum requirements along with a fast and efficient registration process make them interesting for traders.
Potential partners like MobyTrader can give cushion to Bakkt by driving users who regularly trade in bitcoin. This option exchange allows its users to trade with 0.1 mBTC thus driving a number of retail clients to its platform. Hence, even though the investments are relatively low, the volume remains high.
Option and instant exchanges require minimal efforts to register and also without the need to provide multiple identity documentation. Facilitating its users to trade a bitcoin in few simple clicks and with an easy-to-understand interface has made these exchanges popular amongst the potential customers. This is also one of the reasons that the option trading exchanges acquire users, especially retail clients, much faster and easier. With minimum resources, option exchanges have the capability to scale relatively easy.
In order for Bakkt to become a large giant in the cryptocurrency space, it would need the support of such individual trading platforms that either hold a strong user base or brings in users who regularly deal with bitcoins. This would bring more liquidity, in the form of bitcoins, for the exchange platform.
The spectacular and hyped entrance of Bakkt can be accredited to having a prominent company behind its formation. Its entry into space also invited a number of speculation on bitcoin’s price. While it has not managed to yet create any ripples in the price or the industry as a whole, its graph looks to be growing upwards.
Regulated bitcoin futures are said to be one of the upcoming trends in the crypto industry. Bakkt is only getting started. It has already gained rapid momentum with its volume. Moreover, all the ongoing developments news suggests that it is taking giant steps in order to expand and innovate. All-in-all, looking at the present scenario, the future for Bakkt looks bright. The team, it’s working model protocol, even the support from companies like Starbucks and Microsoft have all scored major points for Bakkt.
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