Bakkt Futures are Not Backed by Bitcoin

  • Bakkt’s arrival was supposed to be rocket fuel for the number one cryptocurrency.
  • Even with Bakkt’s growing volume, the demand has not translated into bullish bitcoin prices.
  • Institutions participating through Bakkt are trading on leverage instead of taking physical delivery of bitcoin.

Many crypto enthusiasts saw Bakkt’s entry earlier this year as a bullish driver. The launch of the ICE-operated platform was to mark the arrival of institutional investors. With all the hype surrounding the bitcoin futures exchange contract facilitator, the supposedly industry-bending event came as a non-event.

Bakkt failed to deliver as expected.

A few months later, I understand why the launch of the ICE-backed company was not a bullish event. Thanks to the in-depth research of trader and economist Alex Kruger, we can all comprehend how Bakkt is being used.

Bakkt’s Bitcoin Futures Contract Volume Is Steadily Growing but Bitcoin Is Still Dumping

The prevalent story behind Bakkt is that institutional investors now have a way to legally buy bitcoin through a reputable and regulated company. Through the futures exchange’s custodial services, institutions can buy bitcoin and store the coins in the company’s warehouse.

This sounds like a bullish narrative. Institutions can take coins out of circulation and store them in Bakkt’s warehouse. As monthly futures volume grows, one can expect that demand for the number one cryptocurrency would increase as well.

If you’re a retail investor, it is easy to make the mistake that Bakkt’s strategy is bitcoin rocket fuel. However, the ICE-operated company may not have been 100% transparent to the crypto community.

Case in point: The volume of its bitcoin monthly futures contract has been on the rise yet bitcoin remains sluggish. The theory that institutions are taking bitcoin out of circulation does not appear to be holding up.

bakkt volume
This chart is supposed to be bullish for the dominant cryptocurrency. | Source: Twitter

Fortunately, Alex Kruger…

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