The Intercontinental Exchange (ICE), which owns and operates the New York Stock Exchange and more than a dozen markets and exchanges worldwide, officially announced its new cryptocurrency business last Friday.
It’s called Bakkt, and the new platform will allow investors to buy, trade and store cryptocurrency on a federally regulated market. Bakkt will focus on bitcoin initially. And it’s scheduled to launch (pending regulatory approval) in November. It will primarily target institutional investors (large financial firms) – though there will be some offerings for retail investors. And it will also help merchants accept cryptocurrency as payment.
Here’s how Bakkt CEO Kelly Loeffler describes the project:
Bakkt is designed to serve as a scalable on-ramp for institutional, merchant and consumer participation in digital assets by promoting greater efficiency, security and utility…
We are collaborating to build an open platform that helps unlock the transformative potential of digital assets across global markets and commerce.
And here’s how BK Capital Management founder Brian Kelly reacted to the news on CNBC:
They’ll now have a U.S.-regulated exchange, and they have a licensed warehouse, which is how commodities are stored, and that’s going to make it a lot easier for an ETF to come through.
Amen.
Clearly, ICE sees a future in crypto assets. Bakkt’s first product will be a bitcoin futures contract. This contract is different from other bitcoin futures currently on the market because it has real deliverable bitcoin attached to it (by contrast, the CME and CBOE futures are synthetic, meaning there’s no actual bitcoin involved).
Bakkt “Backed” by Major Players
ICE is an extremely large and powerful financial force on its own. And it has chosen very impressive partners to work with on Bakkt.
Investors in the project include…
- Pantera Capital
- Susquehanna International Group
- Protocol Ventures
- Galaxy Digital
- Fortress Investment Group.
The first four on that list are among the largest crypto asset management companies in the world. They’re pioneers in the field and manage large funds. All are very well-connected players in the crypto world.
The last investor, Fortress Investment Group, is a large traditional firm with more than $70 billion under management. Overall, it’s a very impressive group of investors.
Bakkt is partnering with Microsoft for cloud infrastructure and security.
This is a serious endeavor, and it’s exactly the type of solution that’s needed to bring big investors into crypto. Professional investors are conservative by nature. They want to work with big names they can trust. Bakkt gives them exactly that.
Market Reaction?
After news that ICE was officially launching Bakkt broke last Friday, bitcoin retreated from more than $8,000 to near the $7,000 level (where it’s been hovering for a few months).
This was very positive news, but for whatever reason, the market didn’t see it that way. Or maybe the announcement was already priced in, and this was simply a “sell the news” reaction.
Either way, I’m not concerned. You learn to accept the ups and downs after a while. This is why there’s such a focus on holding long term in the crypto community, with “hodl” being chanted like a mantra.
Final Hurdles to Mainstream Adoption
Here’s what I’m focused on instead of short-term price action.
Institutional investors are – for the first time – gaining access to crypto markets. Up until now, only a few forward-thinking venture capitalists and hedge funds had entered the space.
This is different. This is opening up crypto markets to every investor in the world. Bakkt and competing companies are in a race to build out the infrastructure necessary for this to happen.
Secure, regulated custody of crypto for institutional investors is one of the final hurdles we have to clear before crypto can truly go mainstream. Professional investors won’t enter the market without it. This is being built out right now by passionate entrepreneurs and savvy investors.
It’s also likely that a bitcoin ETF will be launched by the end of the year, potentially giving millions of retirement and brokerage accounts (and institutional money) access to crypto markets.
In short, the “institutional catalyst” theory that I and others have proposed is on track. In fact, the case is stronger than ever.
Once a few big funds or endowments make a move into the space, many more will follow. Everyone will want a small portion of their overall assets in crypto (starting with bitcoin). It’s the ultimate hedge with unparalleled upside.
All the bitcoin in existence today is worth around $119 billion. I think one day it could easily be as big as the entire gold market, which is worth around $7.5 trillion.
I’ve positioned myself, and our members, accordingly.
P.S. In a few weeks, I’ll be releasing a new video detailing how we see the Wall Street crypto boom playing out. Stay tuned.