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Could Bakkt Bitcoin Futures Market Launch in December Lead to ETF Approval?
In an official statement, Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE), revealed that Bakkt will launch its Bitcoin futures market by December 2018.
Bakkt, a global cryptocurrency platform developed by ICE to enable investors, merchants, and consumers to access, trade, and utilize digital assets in a faster, cost-effective, and regulated way, is planning to introduce a suite of products including its cryptocurrency futures markets to strengthen the global infrastructure that supports digital assets.
How it Could Impact Bitcoin ETF Decision
On Aug. 24, the US Securities and Exchange Commission (SEC) rejected nine Bitcoin exchange-traded funds (ETFs) filed by three companies, all of which proposed BTC futures markets operated by CME Group and Cboe to provide the base price of BTC.
At the time, the decision of the three firms to file nine BTC ETFs that attempted to circumvent the SEC’s concerns on the dependence of publicly tradable instruments on unregulated exchanges was seen as a smart move to propose the commission with a different approach to operating an ETF.
But, the SEC ultimately denied the nine ETFs, stating that the entire Bitcoin futures market ecosystem as a whole is not of a significant size to launch an ETF on top of.
The SEC said:
“[The ETFs have not met the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices. Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are ‘markets of significant size.”
As of current, the Bitcoin futures market remains dominated by CME Group and Cboe, that have only started to operate fully regulated BTC futures exchanges by the end of 2017.
The entrance of Bakkt in the Bitcoin futures exchange market is expected to drastically increase the liquidity and trading activity in the market, which may lead to the SEC reconsidering the significance of the market and more specifically, the impact the futures market could have on the actual price of BTC.
The official statement of ICE read:
“ICE Futures U.S., Inc. will list the new Bakkt Bitcoin (USD) Daily Futures Contract for trading on Wednesday, Dec. 12, 2018. The Bakkt Bitcoin (USD) Daily Futures Contract is a physically-settled daily futures contract for bitcoin held in Bakkt LLC, ICE’s Digital Asset Warehouse, and will be cleared by ICE Clear US, Inc. Each futures contract calls for delivery of one bitcoin held in the Bakkt Digital Asset Warehouse and will trade in U.S. dollar terms.”
Billionaire Investor Mike Novogratz Agrees
Mike Novogratz, an early investor in the cryptocurrency market and the CEO of Galaxy Digital, which recently became the first custodian customer of Fidelity Investments, stated the emergence of the Bakkt BTC futures market will increase the probability of a BTC ETF based on a BTC futures market to be approved in the near future.
The cryptocurrency market is being institutionalized at a faster rate with infrastructure supporting the class strengthening rapidly, especially with the progress made by companies such as Bakkt, Coinbase, and BitGo.
— Michael Novogratz (@novogratz) October 22, 2018
The last barrier between the cryptocurrency and institutional investors has long been recognized to be custodian solutions. BitGo, Coinbase, and Fidelity Investments have already started to provide crypto custodian solutions.
In the months to come, the cryptocurrency market will likely anticipate the decision of the US SEC to approve or reject ETFs, a move that could heavily impact retail traders and individual investors based in the US.