Institutional cryptocurrency exchange Bakkt, which plans to introduce the first physically-delivered Bitcoin contract in futures markets, is planning to begin user-acceptance testing on its software on July 22nd. This means that users will have access to its software and can begin trading futures on that date. For all practical purposes, it can be likened to a launch of its futures exchange.
In a Medium post, Bakkt COO compared Bakkt’s launch to the Apollo 11 mission which ferried the world’s first astronauts to the moon, stating that the futures exchange will “usher in a new standard for accessing crypto markets.”
The imagination-stretching analogy apart, Bakkt’s launch is expected to herald the entry of institutional investors. For the most part, speculation by retail investors has driven prices for cryptocurrencies. Institutional investors are necessary to reduce volatility and bring liquidity into crypto markets.
To that end, the exchange envisages a setup that is standard such outfits. It will be federally-regulated and its contracts will comply with federal standards and be subject to surveillance. A clearinghouse will vet participants and act as a counterparty between buyers and sellers. Its custody warehouse will be insured to the tune of $100 million. These practices are not common in operations at most cryptocurrency exchanges, which encourage anonymous trades and fall outside the purview of regulation.
The exchange also released details pertaining to its contracts recently. The monthly futures contract will consist of a contract size of 1 Bitcoin and a minimum tick size (price movement) of $2.50 per Bitcoin. Block trades will have a minimum size of 10 lots and a minimum contract size of $0.01 Bitcoin. The daily futures contract has similar specifications of a minimum contract size of 1 Bitcoin, tick sizes of $2.50 per Bitcoin, and a minimum size of 10 lots for block trades. The difference between both contracts lies in their listing cycles. While monthly futures contracts can have a listing cycles of up to 12 consecutive contract dates, daily futures contracts are eligible for 70 consecutive contract dates.
Bakkt is backed by the Atlanta-based Intercontinental Exchange, owners of NYSE. The exchange’s expected launch late last year was delayed due to regulatory hurdles. They are not the only ones planning to attract institutions to cryptocurrencies.