How Bakkt and Coinbase Are Trying to Bring Institutional Investment to Crypto
Coinbase and Bakkt are two of the most promising companies in the crypto industry as it prepares to attract institutional investors. This past week, both firms released promissory statements advertising their services to institutional investors.
As pointed out by BTCManager.com, the statements by Coinbase and Bakkt have a lot in common with each other. They were both published on August 20, 2018. Both statements have similar wording and framing. Both companies share the belief that institutional investment is the future of crypto trading.
How will Coinbase and Bakkt attract institutional capital to the crypto space? Let’s take a closer look.
Coinbase and Bakkt Are Betting Their Business on Attracting Crypto Investors
First, BTCManager explains why it’s a big deal for Coinbase and Bakkt to bet their business on institutional crypto investment:
“The news that Bakkt and Coinbase have published plans for welcoming institutional investment in the crypto market is potentially huge because this means that two of the most significant crypto exchange platforms in the market are effectively betting on a crypto market future that is dominated by legacy investors.”
Coinbase is America’s largest crypto exchange by market volume. The San Francisco-based company has risen to become a giant in the space.
Bakkt, meanwhile, emerged just a few weeks ago, but it has already attracted attention due to its owners: Bakkt was launched as a partnership between the New York Stock Exchange, Microsoft, and Starbucks.
The list of organizations backing Bakkt is a “who’s who” of corporate America. The company was officially formed by NYSE owner InterContinental Exchange (ICE), with other organizations backing it including Boston Consulting Group (BCG) and Fortress Investment Group.
Both companies have a chance of attracting major institutional investment to the crypto space.
How Bakkt Plans to Target Institutional Investors
Bakkt recently released a blog post called, “An Evolving Market”. In that blog post, Bakkt explains its strategy to attract and retain institutional investors. First, Bakkt will launch an exchange framework to create a secure foundation on which crypto institutional investors can build:
“…We’re starting with a proven framework that underpins exchanges, including a consistent regulatory construct, transparent, efficient price discovery, and an institutional quality pre- and post-trade infrastructure.”
Bakkt believes that big institutional investors will come to the market when they see a stable, secure, and established framework. By building strong mechanics – like effective price discovery – Bakkt aims to build an exchange that institutional investors can trust.
Bakkt also plans to attract institutional investors by offering them a fully funded or collateralized buying and selling process. Investors will have the peace of mind that their bitcoin contracts are not margin trading, for example. This will create increased market integrity.
These strategies, combined with a secure and regulated physical settlement warehouse, will draw institutional investors to the space.
How Coinbase Plans to Target Institutional Investors
Coinbase, meanwhile, has outlined five guiding principles for attracting institutional investors. Those principles collectively create the “North Star” for institutional investors, according to Coinbase.
The goal of the five principles is to create secure and fair crypto trading. Coinbase will ensure fairness with a Market Operations team that will actively monitor markets and carry out the same surveillance practices as today’s largest global exchanges.
Coinbase’s platform will actively monitor exchanges to track suspicious trading behavior and ensure fair market conditions for all investors.
Institutions who work with Coinbase will also have access to “institutional grade infrastructure and processes” to assist them with compliance, onboarding, security, and operating procedures.
Transparency, security, and access to information are other guiding principles outlined by Coinbase to attract institutional investors.
Ultimately, institutional investors are already dipping their toes into the crypto investment world. However, we have not yet seen a flood of institutional capital. If Coinbase and Bakkt are successful, then we could soon see an enormous amount of institutional investment pour into the crypt industry over the coming months.