- Bakkt accounts for “only a tiny fraction” (~0.001%) of ICE’s total volume and earnings
- Be cautious about banking too much on BTC futures
- ICE well-positioned to become a market leader in the crypto markets
- Physical delivery could spur BTC adoption as a currency in the long run
As we saw in the past couple of weeks, Bakkt has really failed to gain much traction but just like many other crypto industry commentators, Oppenheimer Research Note also says, it’s still early days for the digital asset platform.
On Sept. 22, Bakkt, a joint venture by ICE, Microsoft, Starbucks, and BCG, launched its bitcoin futures for trading.
The market was expecting a bull rally triggered by this launch because of, as the report points out, a few reasons. The first and foremost being the physical delivery of BTC futures when the contract expires and
“ICE CEO Sprecher's track record of disruption.”
However, the trading volume recorded by Bakkt saw a much slower start than that of CME and CBOE and further comprised “only a tiny fraction” of ICE’s total volume and earnings.
Bakkt Bitcoin futures, that represent one BTC per contract, traded only 125 contracts on average in the first five days of trading in comparison to 2,000 contracts traded on CBOE in the first five days, and 500 contacts in CME for the first month.
Cautiously Optimistic View
Although BTC futures presents significant potential, they are being cautious about banking too much on them because the current earnings contribution is immaterial and the scope of BTC adoption is uncertain and limited.
Moreover, the report further states that with CME to launch options on its BTC futures contracts in 1Q20 — highlighting increased interest from institutions — will allow
“~3,300 CME individual accounts trading bitcoin futures another channel to bet on the volatility of bitcoin.”
But Why Positive?
Despite Bakkt’s slow start the firm is
“encouraged by the development of Bakkt in terms of its infrastructure.”
“bitcoin futures are still nascent and form only a small fraction of exchanges' ADV, therefore, we recommend investors shouldn't get too upset, or excited, about the current trading volume and developments yet,”
ICE operates exchanges, clearing houses, and listing venues for fixed income, commodity, and equity markets in the US and Europe.
“Given that ICE has many other electronification initiatives in fixed income analytics and trading, mortgages, and fixed-income ETFs, we recommend investors not get upset about the current trading volume,”
states the report.
Actually, they are positive on ICE’s involvement as the company sees it as the true disruptor in the space which is a leader in energy and
“well-positioned to become a market leader in the digitization of the fixed income, mortgage and crypto markets.”
The report further points out that the physical delivery could spur BTC adoption as a currency in the long run.