An evolving market
The need for trusted price formation
Two weeks ago we introduced Bakkt, a new company designed to bring digital assets to the mainstream and help unlock the potential of this important technology. We appreciate the response to our announcement and the conversation since.
The internet, where we see this dialogue unfolding transparently, is a global network that today we take for granted. But nearly 20 years ago when the web was in its infancy, the spark for digital assets was there. It sticks with me that back then, Nobel Laureate Milton Friedman predicted that e-cash would emerge. And now are we seeing the promise of a true digital currency.
Whether you’re an investment manager seeking federally regulated, institutional trading and security solutions or a consumer looking for more choice in transacting, we’re working to make the vision for wider application of digital assets a reality.
I wanted to share a couple of quick observations from the last two weeks. First, the response to our news worldwide was very strong. The credit for that goes in large part, to a premier group of partners and the vision for Bakkt we collaborated on for months. Equally important is the widespread need we’re hearing for trusted infrastructure for trading, storing and spending digital currencies.
To achieve that, we’re starting with a proven framework that underpins exchanges, including:
- a consistent regulatory construct
- transparent, efficient price discovery, and
- an institutional quality pre- and post-trade infrastructure
The concept of “price discovery” might sound bland for something as exciting as Bitcoin. However, trusted price formation is a fundamental part of advancing the promise of digital currencies.
A critical element to price discovery is physical delivery. Specifically, with our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded. As such, our new daily Bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset. This supports market integrity and differentiates our effort from existing futures and crypto exchanges which allow for margin, leverage and cash settlement. Coupled with a secure, regulated warehouse solution, you can begin to see how this market infrastructure can help more institutions and consumers participate in the asset class.
Recently, the Wall Street Journal headlined that the aggregate market capitalization of digital assets slid below $200 billion, down 70% from the peak at the start of 2018. At the same time, there are numerous reports that venture investing, initial coin offerings, and corporate R&D related to blockchain and digital assets are all on track to surpass 2017 levels. With the potential for efficiency and innovation, the focus on new applications and infrastructure indicates a strong appetite for this market and technology.
It’s exciting to do this work as the end of a busy summer approaches and an even busier fall awaits. Thanks for your interest and feedback.