Bakkt Exchange Could Increase Bitcoin ETF Approval Odds By Adding Trusted Price Information
Could New Crypto Startup Bakkt Be the Key to Bitcoin ETF Approval?
Bakkt is a startup that aims to onboard customers to the world of crypto. A new report suggests that Bakkt, which is owned by the New York Stock Exchange, could help lead to the approval of the world’s first bitcoin ETF.
That report comes from CCN.com:
“The SEC has disapproved 10 Bitcoin exchange-traded funds (ETFs) in the past month but analysts believe Bakkt can assist the launch of the first bitcoin ETF.”
For those out of the loop, it’s been a tough few months for bitcoin ETFs. Since 2013, the SEC has rejected over 20 different bitcoin ETFs from various companies. On Wednesday, the SEC denied 9 more ETFs from three different funds.
The SEC has rejected all of these ETFs for a similar reason: they feel bitcoin markets aren’t mature or deep enough to support safe trading. The SEC feels that bitcoin markets are prone to price manipulation, for example, and don’t have sufficient liquidity to prevent this behavior.
Could Bakkt really solve that problem? Could Bakkt be the company that solves bitcoin’s biggest problems?
Bakkt Has Already Solved Two Of The SEC’s Biggest Issues With Bitcoin Markets
Bakkt is already one of the most legitimate companies in the crypto space. The startup was created in partnership between Microsoft, Starbucks, and the New York Stock Exchange. Bakkt’s goal is to bring digital assets to mainstream audiences by building a consistent regulatory framework.
Bakkt also wants to create efficient and transparent price discovery mechanisms. Another key goal is to build institutional-grade pre and post-trade infrastructure.
All of these services, if successful, will help expand crypto’s mainstream applicability. At the same time, these services could solve some of the biggest problems in the crypto space.
By solving these problems, Bakkt could be the company responsible for finally bringing an approved bitcoin ETF to the industry.
How could Bakkt help to approve a bitcoin ETF? Well, in rejecting bitcoin ETFs, the SEC has consistently had a number of problems with the industry. Two core problems that continue to resurface include:
- Lack of trusted price formation
- Reliance on futures markets and derivatives
The SEC mentioned both of these issues when rejecting 10 ETFs this past month. Bakkt believes it could solve those problems:
“A critical element to price discovery is physical delivery. Specifically, with our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded. As such, our new daily Bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset,”
said Bakkt CEO Kelly Loeffler in a recent blog post discussing the goals of Bakkt.
Theoretically, this should lead to some of the best price discovery in the bitcoin industry. That could alleviate at least some of the concerns raised by the SEC.
In fact, Bakkt’s exchange solves both of the problems mentioned by the SEC above, including the lack of trusted price formation and the reliance on futures markets and derivatives. Using a fully collateralized, pre-funded bitcoin on their exchange, Bakkt will facilitate real price discovery for real bitcoins.
These are two of the biggest problems outlined by the SEC. Bakkt has already solved them.
The other big problem mentioned by the SEC is price manipulation. Bakkt could also solve that problem by bringing increased legitimacy and liquidity to crypto markets, reducing the ability for bad actors to manipulate prices in illiquid markets. If Bakkt can solve that problem, then there’s a real chance a bitcoin ETF could be approved.
There’s More Reason For Optimism
Bakkt is giving us reason to hope for bitcoin ETF approval. However, there’s hope for bitcoin ETF approval outside of Bakkt’s services.
The SEC denied 9 bitcoin ETFs on Wednesday afternoon. By Thursday, however, the SEC had decided to temporarily stay the decision. As of Friday, the SEC’s decision on the 9 bitcoin ETFs is pending. The SEC’s executive team is reviewing the decision to deny the ETFs. Some suggest that the SEC could overturn its initial ruling, while others claim that the SEC is simply doing its due diligence.
The other reason for optimism is that one of the most promising bitcoin ETFs is scheduled to be approved, denied, or delayed by next month. The SEC needs to make a decision on the VanEck SolidX Bitcoin Trust ETF by September 30, 2018. It’s one of the most promising ETFs making its way through the regulatory system – and it stands a real chance of being approved by the SEC.
Could Bakkt be the company that convinces the SEC that bitcoin markets can handle an ETF? It’s certainly possible. And, since the company is backed by Starbucks, Microsoft, and the New York Stock Exchange, it already has the support of some of the most influential organizations in America. Stay tuned to see what happens next with Bakkt and bitcoin ETF approval.