Intercontinental Exchange Inc is working on the first Bitcoin futures that pay out in cryptocurrency. They are now working with the CFTC to ensure that the project is in line with the current regulations. A decision should be made in early 2019.
By investing in Bitcoin futures, investors will be able to place bets on the future price of Bitcoin. This future is unique in that, unlike others that already exist, it pays out in cryptocurrency rather than fiat currency.
What sets Bakkt apart from other bitcoin derivatives is that it pays out entirely in cryptocurrency, instead of settling in cash. The WSJ report noted that while the application is still under the Commodity and Futures Trading Commission (CFTC), review, it will definitely be launched in 2019.
Speaking on the possibilities, Kelly Loeffler, chief executive of the New York Stock Exchange owner Intercontinental Exchange (ICE) cryptocurrency business, which has been instrumental in backing the contract said:
“Once digital assets have more trust and regulation, people will be more comfortable using digital assets as currency. It’s great to have cash-settled, but there’s a need for physical delivery of bitcoin.”
Bakkt is starting with bitcoin, which is regulated by the Commody Futures Trading Commission. The company’s role, as Loeffler explained it, is to provide custody and price discovery for bitcoin that’s free from fraud and manipulation. Prices now tend to fluctuate depending on the exchange, which in many cases are unregulated.
She said: “We’re creating that infrastructure that doesn’t exist today, which we think is a big opportunity for institutional investors to come in,”
Nasdaq Inc is also planning to launch Bitcoin futures at the beginning of 2019, according to a report. The U.S. based stock exchange revealed plans to offer Bitcoin futures to users last year. The exchange plans to start trading futures in the first quarter of 2019. Nasdaq has also been working to get the futures approved from Commodity Futures Trading Commission [CFTC].
Bitcoin futures was first introduced by Cboe [Chicago Board Options Exchange], the Chicago based stock exchange, in December 2017. Later the CME [Chicago Mercantile Exchange] group launched its own version of Bitcoin futures contracts. Bitcoin futures on CME is based off four markets while its just one at Cboe.
Just to remind you, in October, Intercontinental Exchange (ICE) released the document that says they will likely launch Bitcoin futures on its Bakkt platform by December 2018. ICE, the parent company of New York Stock Exchange (NYSE), announced about the Bakkt crypto trading platform this year in August 2018.
In addition to crypto trading, the Bakkt platform aims to make crypto spending in daily lives. ICE believes that it would actually trigger the mainstream adoption of cryptocurrencies. For this, ICE has collaborated with a number of tech and retail giants like Microsoft and Starbucks.
The Bakkt crypto trading platform was firstly expected to go live by November, but then Bakkt said that they are “targeting” Jan. 24, 2019 as a launch date. ICE then confirmed that no matter delay, they still had plans to create a Microsoft cloud-powered open and regulated, global ecosystem for digital assets.
Possible Bull Run for Bitcoin
Recognized crypto trader Alex Krüger went as far as saying that, when it launches, Bakkt’s futures, will lead a bull run for Bitcoin to the first quarter of 2019. While the approval of Bakkt’s contract would lead to growth for the market, the disapproval of VanEck’s bitcoin exchange-traded fund could crash prices. Krüger then said that the arrival of ICE’s Bakkt platform will be the major trigger for the BTC price recovery by end of 2018 and almost during the first quarter of 2019.
On the other hand, he also went to say that the rejection of CBOE Bitcoin ETF could possibly lead to a crash in the Bitcoin price. However, in the worst case scenario, Bitcoin can go to as low as $4000.
Recent research and reporting indicate that crypto futures contracts are particularly susceptible to manipulation, especially in the form of ‘banging the close,’ or intentionally reckless behavior which disrupts the market to the advantage of the trader.
While the fact that crypto futures are particularly vulnerable to manipulative activity might be an obstacle for Bakkt’s launch, presumably regulated platforms and contracts like Bakkt are a crucial step towards the maturation and stabilization of the market.
This project will, however, receive an exemption from the Commodity Futures Trading Commission to hold bitcoin on behalf of investors as current regulations only make provisions for fiat currency, securities, and agricultural commodities.
There have also been measures put in place to prevent cyber attacks and secure investors’ assets in the event that one occurs.
For now, the commission is reviewing the business plan and will likely vote on it in early 2019. After this, the public will have about a month to weigh in on it.