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Physically Delivered Bitcoin Futures


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Physically Delivered Bitcoin Futures

  #1 (permalink)
 
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 SMCJB 
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BAKKT™ BITCOIN (USD) DAILY FUTURES CONTRACT TO BEGIN TRADING ON DECEMBER 12, 2018
ICE Futures U.S., Inc. will list the new Bakkt Bitcoin (USD) Daily Futures Contract for trading on Wednesday, December 12, 20181. The Bakkt Bitcoin (USD) Daily Futures Contract is a physically-settled daily futures contract for bitcoin held in Bakkt LLC, ICE’s Digital Asset Warehouse, and will be cleared by ICE Clear US, Inc.


https://www.ice.com/publicdocs/futures_us/exchange_notices/ICE_Futures_US-Notice_BitcoinLaunch102218.pdf

Not sure I get the need for 'daily' rather than 'monthly' contracts though.

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  #2 (permalink)
 
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SMCJB View Post

Not sure I get the need for 'daily' rather than 'monthly' contracts though.

I think this is a daily Futures to physical service because Bakkt is a warehouse service of the digital coin formed by ICE.
To me, it seems as pure institutional service.

Matt Z
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 SMCJB 
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Thanks Matt. Very Interesting. So you think it becomes a way for Institutions to "get the bitcoins into Storage" rather than as a trading mechanism.

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Thanks Matt. Very Interesting. So you think it becomes a way for Institutions to "get the bitcoins into Storage" rather than as a trading mechanism.


My understanding is that Bakkt is owned and operated by ICE. This means that each Futures contract traded on ICE will need to have an actual digital Bitcoin for delivery purposes. Hence the name Bakkt, as in backing up each Futures contract with actual physical delivery. Once you have Bitcoin in physical form, then you can store it where institutions would pay lots of money for Cold Storage (i.e. off the net) or use it or commercial purposes. In my opinion, this does not pass the trading smell to me.

If ICE wanted to make it a trading instrument, it would create something similar to CBOE or CME that created cash-settled products.

Having said all of the above, we could see this product gaining traction in terms of volume, and hence see retail participating in it and exiting before the end of the session. All of the above is just my opinion and observation. If someone has a different understanding, I would be more than happy to hear it.

Matt Z
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There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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 GoldenRatio 
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https://www.vantharp.com/Tharps-Thoughts/912-10-17-2018.html

"Few people probably know that Intercontinental Exchange, which owns the New York Stock Exchange along with a number of other exchanges, is hard at work developing an institutional platform to trade cryptocurrencies. The name of the platform is Bakkt and it’s rumored to start in November 2019.

First, the exchange is working in partnership with Microsoft and Starbucks. The platform will be cloud-based which is where MSFT technology and expertise come into play. In addition, Starbucks is involved in helping currencies like BTC be accepted as payment at numerous retail outlets.

When this exchange starts trading it should not only be the end of the bear market in cryptos, it will also be a huge stimulus for the market. It would surprise me to see BTC at $50K to 100K by the end of 2019 and that gains from other cryptos will dwarf that. In 2018 the cryptoassett market cap had gone down to about $200 billion from $800 billion. With these new developments, we could see the market cap at 3-4 trillion by the end of 2019.

So what is known about Bakkt, the CEO is a woman, Kelly Loeffler. In addition, she has recently hired Adam White from Coinbase to be the Chief Operating Officer. Bakkt will be a direct competitor to Coinbase.

Right now the platform is currently awaiting operational approval from the US Commodities and Futures Trading Commission (CFTC), could potentially act as a compliant on-ramp that could bring about Bitcoin mutual funds and ETFs to retail investor’s 401(k). The is expected shortly but regulation issues that involve the government are never easy.

Loeffler explained that the platform is currently hard at work with members of the clearing house risk committee, and is working closely with their clearing house boards to meet the regulatory guidelines set forth by the CFTC and the US government. Subject to CFTC approval, the exchange hopes to begin testing and onboarding in November, with trading starting the following month, in December.

Bakkt is also awaiting approval on a patent for their proprietary market model that aims to provide institutions with a regulated framework for offering cryptocurrency-related products to their clients. Again, patent approval depends upon the US government.

Her comment has been: "Our patent-pending market model is focused on mitigating risk while creating opportunities for institutions to serve their clients in a regulated framework for digital assets. This means creating a solution that both provides wanted exposure and limits unwanted exposure. A critical aspect of our model is ensuring that our clearing members are well protected from a risk perspective through a conservative market design…”

The aforementioned model will utilize three key requirements to ensure risk mitigation, including a requirement for full pre-funding for all Bitcoin trades, direct access to the warehouse, which means that clearing members will not have to handle cryptocurrency themselves, and a fund that ensures that non-default clearing member capital is never at risk.

Loeffler also explained that forming a regulatory framework for nascent industries is incredibly important, and that dialogues regarding regulation are already in full swing, specifically mentioning the attendance of regulators at the recent LabCFTC FinTech Forward conference.

Assuming the platform is approved by the necessary regulatory bodies, Bakkt could bring a significant amount of retail wealth into the cryptocurrency industry, possibly reversing the persisting bear market.

In addition, this is just the setting that will enable the CBOE to launch an ETF for Bitcoin which should get SEC approval in 2019. It’s hard to imagine the SEC not approving a CBOE product which will be based upon bitcoin futures.

In addition, I would expect ETFs for ETH in 2018 and there is a good chance that some of the crypto indices, such as the Bloomberg index, will also form the basis for ETFs. If this happens in 2019, then my estimate of a 2-4 trillion market cap for crypto is probably way too low."

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  #6 (permalink)
picklerick
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Bakkt will allow ICE (revenue $5.8b pa) to start, initially, andoffering physical BTC futures to customers they need to find.

OTOH, Fidelity (revenue $18.2b pa) already have 13,000 institutions (fund managers and pension managers) as clients for which they offer stock trades and custody, and composite funds. This will add crypto to the offered pot.13,000 institutions. 13,000.

I think Fidelity is going to be bigger news.

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kspreier
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Just in time for Christmas! Should put a smile on every hodler's face.

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  #8 (permalink)
 
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 SMCJB 
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https://www.ice.com/publicdocs/futures_us/exchange_notices/ICE_Futures_US-Notice_BitcoinLaunch20181231.pdf

Following consultation with the Commodity Futures Trading Commission, ICE Futures U.S., Inc. expects to provide an updated launch timeline in early 2019, for the trading, clearing and warehousing of the Bakkt Bitcoin (USD) Daily Futures Contract. The launch had previously been set for January 24, 2019, but will be amended pursuant to the
CFTC’s process and timeline.

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Last Updated on December 31, 2018


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