Bakkt: The Necessity of an Evolving Market

Bakkt is a platform geared toward bringing digital assets to the mainstream and unlocking the technology’s potential. The platform released a statement on the online news publication Bakkt, about a few observations.

First, response to the platform’s news about its development through the Microsoft and Starbucks partnership was largely positive. Much of the credit for the positive response is due to a premier group of partners, which collaborated with Bakkt to develop its vision. The platform also stated that:

“equally important is the widespread need we’re hearing for trusted infrastructure for trading, storing and spending digital currencies.”

The platform is working with a proven framework that underpins exchanges, that includes a consistent regulatory construct, a transparent and efficient price discovery, and an institutional quality pre-and-post trade infrastructure. Though the concept of “price discovery” may sound “bland,” as the platform notes, it recognizes that trusted price information is a key and integral part of advancing digital currencies.

Second, the platform identifies a second critical element to price discovery – physical delivery. The platform is releasing a new:

daily Bitcoin contract, which will not be traded on margin, leverage, or serve to create a paper claim on a real asset.

These qualities work to support market integrity and it differentiates the platform’s effort from existing futures and crypto exchanges, which do allow for margin, leverage, and cash settlements. In relation to this matter, the platform also stated that:

“coupled with a secure, regulated warehouse solution, you can begin to see how this market infrastructure can help more institutions and consumers participate in the asset.”

The Wall Street Journal the market capitalization reached below $200 billion, which is down 70 percent from the peak start of 2018. There are also many reports discussing venture investing, digital coin offerings, and corporate R and D, all related to blockchain and digital assets, which may surpass 2017 levels.

The platform is currently looking forward to the work ahead of it and the interest and feedback that it has received.

The Medium post by Bakkt's CEO has sparked some conversations on the good and bad news for Bitcoiners. We will highlight a few of the better ones:

Updated Bakt statement https://t.co/39bN0c9UXH

Borrow and "paper bitcoin" evaporated

CC: @CaitlinLong_ @laurashin pic.twitter.com/TZYyEoTxXf

— I am Nomad (@IamNomad) August 20, 2018

1/ Interesting response from @Bakkt today. For #bitcoin this is good news/bad news. First the good–Bakkt disclosed it's not using margin or leverage (explicitly). That's positive. But then the bad–it was silent about hidden leverage, which is subtle…https://t.co/zkt5RKr4Z2

— Caitlin Long (@CaitlinLong_) August 20, 2018

2/ …and insidious–namely, rehypothecation & commingling of collateral in the clearinghouse, rather than in an individual futures contract itself. Read about how commingling & rehypothecation happen here: https://t.co/uRFT8QBYq6

— Caitlin Long (@CaitlinLong_) August 20, 2018

3/ …and, having negotiated collateral agreements as a pension fiduciary (& tried to get CCPs to agree not to commingle or rehypothecate collateral), this is where the devil is truly in the details. A standard collateral agreement is here (see para 6c): https://t.co/5dqdrN27g0

— Caitlin Long (@CaitlinLong_) August 20, 2018

4/ …I look forward to reviewing all of @Bakkt‘s legal documents when they're made public (including the warehouse custody agreement, collateral agreements of ICE Clearing US & intraday variation margin posting requirements) to determine degree…

— Caitlin Long (@CaitlinLong_) August 20, 2018

5/ …by which @Bakkt creates fractionally-reserved claims on #bitcoin. Plus, Bakkt didn't answer questions abt how will it handle forks–lots of questions posed on that including by @aantonop. I look forward to reading the complete disclosure package when it's available! Thanks!

— Caitlin Long (@CaitlinLong_) August 20, 2018

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