Bakkt is a platform for institutional investors and anyone else to buy bitcoin through its legally compliant system. | Source: Shutterstock
By CCN Markets: Most cryptocurrency enthusiasts have been waiting for the launch of bitcoin futures trading platform Bakkt. Recently, the crypto community rejoiced as the ICE-operated company announced the official launch date of Sept. 23. Within 48 hours after the big reveal, bitcoin surged by 10 percent.
Many investors know that the entry of Bakkt in the cryptocurrency space is bullish for the long-term health of bitcoin. However, very few understand the reasons why. If you’re not one of them, don’t fret because, in this article, we explain the reasons in layman terms.
1.) Bakkt’s Futures Contracts Will be Physically-Settled as Opposed to Cash-Settled
Currently, futures contracts are settled in cash. This means that upon expiry of the contracts purchased, market participants pay or receive the difference between prices upon the futures expiry in fiat currency, such as dollars.
Cash-settled futures contracts have little influence on the demand for bitcoin since market participants are only buying exposure to the cryptocurrency rather than buying the actual coin.
This is where Bakkt separates itself from its competition.
For the first time in the history of cryptocurrencies, there will be a platform that offers futures contracts where buyers can expect the physical delivery of bitcoin. This means that Bakkt has to take out huge sums of bitcoin from circulation in anticipation of client demand.
Twitter user CryptoCalls elegantly summarizes the expected impact of Bakkt’s launch:
bakkt has to buy btc for physical underlying of their futures less btc on free market higher prices for btc
— C̸̭̩͚̉̏̈́̈́̌͝ryptǫ̶̨̩̯͌̂̔̓̑̈́̈́̀̈͂Calls!̶̝͍͑̓͑̋̑͜ (@_Cryptosopher_) August 17,