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Carbon chain value (ID: cc-value)
, Author: Carbon-3, reproduced by Odaily with authorization.
At around 8 a.m. Beijing time on September 23, with the transaction of the first bitcoin futures contract at a price of US$10,115, the long-awaited Bakkt was finally launched. As of 5 a.m. on September 24th, Beijing time, the latest bitcoin price on Bakkt was $9897.5, with a trading volume of 70 coins. During the same time period, the bitcoin price on Coinmarketcap recorded $9862.47, and the bitcoin price on CME recorded $9749.57 s price.
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As of 5 am on September 24th, Beijing time, transaction data on Bakkt | Source: Bakkt
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Market performance below expectations
Considering Bakkts numerous, enviable, and well-reserved resources: the support of top investors, a huge financing of US$182.5 million, transactions (DCM, Designated Contracts Markets), liquidation (DCO, Derivatives Clearing Organization) and escrow licenses (a New York state trust charter through NYDFS) with three licenses, and launched Bakkt Warehouse and submitted BitLicense at the beginning of this year. The market performance so far is indeed difficult to make people compare it with New York Stock Exchange, Bull Market Momentum and so on. Associated with famous names.
Regarding this situation, some insiders in the industry have given analysis, among which the access issue is a common focus of everyone. Dovey Wan, founding partner of Primitive Ventures, publicly stated that Bakkt is temporarily more dependent on traditional large brokerages like ICE, and the entry threshold is still high;
Qitao Capital is one of the first users to experience using Bakkt. Kang Lvzhi from Qitao Capital told Carbon Chain Value that the supervision of futures trading in the United States is relatively strict. On the one hand, both individual and institutional customers need to face detailed KYC and AML procedures; on the other hand, it is difficult for users to find mutual trust and reliable FCM (Futures Commissioner):
Zhu Chenchen, another person from Qitao Capital, explained that because large exchanges in the United States do not directly contact users, they are approached by a special FCM. There is a distance from general users, which makes users have to go further to find a Broker (broker) to link FCM and then get in touch with large exchanges.
This kind of mountainous process naturally makes users face a lot of resistance in opening an account. Although they are already experienced users of CME Bitcoin futures and have successfully obtained the trading qualifications in Bakkt, it took a long time for Qitao Capital to reap the rewards. the above qualifications.
Another factor that hinders Bakkts performance but has received little attention from the market is the incomplete liquidation. It is reported that as an important part of the futures market, the clearing institution is responsible for the hedging, settlement and delivery of futures contracts. It is the agent of both parties to the transaction and has the obligation to guarantee the performance of each contract. Judging from the current situation of the market, for the time being, few large clearing institutions are willing to provide services for Bakkt.
A recent report by The Wall Street Journal (hereinafter referred to as WSJ) bluntly stated that a potential problem facing Bakkt is that in the initial stage, only a small number of clearing institutions are willing to deal with its contracts. According to WSJ sources, Goldman Sachs, one of the largest clearing institutions in the futures market, has no plans to provide clearing services for Bakkts contracts.
In this regard, Kang Luzhi said that due to the relatively immature initial stage of Bakkt’s launch, coupled with the difficulty of understanding the subject of Bitcoin, the relatively complicated operation, and the characteristics of physical delivery, the internal compliance costs of large institutions liquidating the company are relatively high. Some small or special clearing companies are more likely to enter the market. This statement dovetails with the WSJ, which reported that a small firm called Wedbush Securities plans to provide clearing services for Bakkt contracts.
In addition to clearing institutions, Bakkt currently lacks the support of well-known bulk liquidity providers. In contrast, the CME Bitcoin futures contract, which has been online for nearly two years, has received support from 13 institutions, including large enterprises in the blockchain industry such as Genesis Global Trading, Circle Financial, and B2C2. However, Bakkt temporarily lacks the support of institutions of the same size, which may also be a barrier that prevents large funds from entering Bakkt.
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Only bulk liquidity providers, CME Bitcoin futures have been supported by 13 companies, and if brokers and futures agents are counted, this number will be close to 40, which obviously has a significant advantage over Bakkt | Source: CME official website
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Limited impact in the short term, significant in the long term
It is always easy to overestimate the short-term impact of a change and ignore its long-term impact. The performance of Bakkt after its launch is a strong testimony that the market is too optimistic and overestimates its short-term impact.
After being educated by the flat market performance in the initial stage of launch, I believe many people have realized that Bakkts short-term impact on the market is very limited. However, as an important infrastructure for the in-depth development of the encryption market, in the long run, it still plays a pivotal role.
In my opinion, the most important impact of Bakkt on the encryption market is two parts - miners and pricing standards:
Miners are the underlying components of many cryptocurrency systems headed by Bitcoin. They determine the circulation of relevant cryptocurrencies in the market at the source, but at the same time they also bear huge risks: hard to obtain cheap electricity, regulatory situation Factors such as uncertainty, rapid updates and iterations of mining equipment, and direct fluctuations in currency prices all make miners face potentially high costs.
The existence of compliant bitcoin futures contracts such as Bakkt provides miners with the opportunity to hedge losses from falling bitcoin prices, just as many oil producers use futures to hedge crude oil prices. Fitzsimmons, CEO of Wedbush Securities, said that as an agent of CME Bitcoin futures, it has attracted more than ten clients to start trading, including hedge funds and Bitcoin miners.
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According to Kang Law, the physical delivery of Bitcoin futures makes the income curve of miners smoother | Source: Medium@Bakkt
Kang Luzhi told Carbon Chain Value that Bakkts current user groups are mainly small and medium-sized compliance funds, high-net-worth and relatively professional industry investors, and some people in the professional futures industry who are curious about Bitcoin. If Bakkt can operate smoothly, miners and large institutions will occupy a large share in the future.
However, he also pointed out that due to the high barriers to entry mentioned above, there are still certain barriers for miners to enter platforms like Bakkt.
If miners are the dominant and decisive link in this market, then the pricing standard is the invisible decisive link, and in a sense, the pricing standard is a more far-reaching component.
Gu Yanxi once wrote that the settlement price of CMEs Bitcoin futures contract uses the price index provided by Facility Group, but because the exchanges involved are not compliant, the credibility of the index is insufficient. In contrast, Bakkts compliance nature and its product features will allow global financial businesses to trust its settlement prices.
Kang Luzhi said that Bitcoin derivatives are of great significance to its spot transactions. Through the active trading mechanism of the derivatives market, the liquidity of the market will be improved, the enthusiasm of participants will be stimulated, the right to speak in transactions will be gradually enhanced, and a new transaction pricing system will be formed, which will also help to improve the transparency of over-the-counter transactions.
