The Debate on Bakkt and Its Potential Impact on Bitcoin

Bakkt CEO Kelly Loeffler announced in a blog post that the new platform, which will enable people and institutions to buy, sell, store and spend digital assets in a regulated ecosystem, will not support margin trading, leverage or cash settlements.

Bakkt will be based on a one-day “physical Bitcoin futures contract” that will deliver Bitcoin on a specified date and help create “trusted price formation.”

Bakkt, which was unveiled two weeks ago, is backed by the Intercontinental Exchange (ICE), parent company of the New York Stock Exchange. Because it promises to usher digital assets into the mainstream world of finance, everyone from investors to prognosticators to Wall Street execs has been weighing in on whether or not it’s actually good for Bitcoin and the crypto space.

According to Loeffler, the buying and selling of Bitcoin will be “fully collateralized or pre-funded.” And that should quiet the skeptics who claim Bitcoin is nothing because it’s backed by nothing.

Plenty of people on Twitter think Bakkt is the greatest development to hit the crypto space.

https://twitter.com/midnine/status/1031707818104107015

But the Bakkt solution doesn’t appear to satisfy everyone.

Caitlin Long, former chairman and president at Symbiont.io, and founder of the Wyoming Blockchain Coalition, penned an article for Forbes expressing her reservations about Bakkt.

She writes,

“This is a major step in the mainstreaming of bitcoin and cryptocurrencies. But it’s also a double-edged sword, because it’s likely the beginning of Wall Street creating financial claims to bitcoin out of thin air (and not backed by actual bitcoins), which could offset some of Bitcoin’s algorithmically-enforced scarcity.”

Wall Street’s interest in cryptocurrency may be substantially less in the tech and more in its ability to behave like Wall Street – by financializing the digital asset.

Long writes,

“It’s pretty much impossible at this point for anyone to gain control of the Bitcoin network (and likely the other big cryptocurrency networks too), so Wall Street’s only major avenue for controlling them is to financialize them via leverage.

The financial system has perfected the art of leverage-based financialization, unfortunately, and ICE’s announcement about plans to launch a regulated, physical bitcoin futures contract and warehouse (subject to CFTC approval) in November means leverage-based financialization is likely coming to bitcoin in a big way.”

In the short term, Wall Street’s plans on how to profit from Bitcoin isn’t stopping Bakkt supporters on Twitter. It’s also not stopping people from snubbing the painstaking wait for the SEC’s approval of a Bitcoin ETF.

https://twitter.com/midnine/status/1031713419689447424

https://twitter.com/theBIG013/status/1030919246044389382

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