Despite the current bear market in the cryptocurrency universe, there’s still a tremendous amount of innovation and progress taking place, such as the entrance of Bakkt onto the scene in January 2019. The crypto community is busy laying the groundwork to ensure that cutting-edge products and services are available for future participants of this new asset class.
For the first time since Bitcoin was unveiled in 2009, major institutional investors are beginning to enter the cryptocurrency arena. For the past several years, institutional money was unwilling to financially participate in Bitcoin and other digital assets. Why?
Because the world of cryptocurrencies was like the “Wild West,” with very few rules and no regulatory oversight. However, that perception is beginning to change, particularly since the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) entered the Bitcoin landscape in 2017.
Major financial institutions are finally beginning to accept the fact that cryptocurrencies are here to stay. Consequently, many of the big money firms are looking for ways to invest in this new asset class, and there are now enough players in the market to justify a crypto futures platform comparison.
Intercontinental Exchange (ICE) Launches Bakkt
In an attempt to grab its share of the Bitcoin market, the Intercontinental Exchange (ICE) is in the process of launching Bakkt, a global platform for digital assets. Bakkt is teaming up with Boston Consulting Group, Microsoft, and even Starbucks to create an integrated platform designed to enable consumers and institutions to buy, sell, store, and spend digital assets on a global network.
The Bakkt platform focuses on federally regulated markets and warehousing along with merchant and consumer applications. Initially, Bakkt only plans to support Bitcoin on its platform, with the goal of bringing other cryptocurrencies online over the course of the next few years. According to an official tweet, the explain this move saying:
We’ve been asked why we’re starting with bitcoin. Here’s why:
Bitcoin today accounts for over half of total crypto market capitalization and has been deemed to be a commodity, and its derivatives are regulated in the US by the CFTC… (1/2)
— Bakkt (@Bakkt) November 21, 2018
The official launch date is January 24, 2019.
The first product Bakkt plans to introduce is a one-day physically delivered Bitcoin futures contract. The futures contract will be traded on the ICE Exchange, which has been in existence since May 2000. ICE owns several stock and commodity exchanges around the globe, most notably the New York Stock Exchange (NYSE), which was acquired in December 2012.
Cash-Settled vs Physical Delivery
A quick futures platform comparison for what ICE and CME are offering: The major difference between ICE Bitcoin futures and CME Bitcoin futures is the settlement method upon expiration. The CME contact (like many futures contracts these days) is a cash-settled contract. In other words, the owner of the futures contract doesn’t actually receive physical bitcoins when the contract expires.
Instead, the contract is settled in cash by simply debiting or crediting the customer’s account. The new ICE contract will be settled with actual bitcoins. Upon expiration, the customer will receive one bitcoin, which is the contract size of the ICE futures contract.
In addition to introducing a new futures contract, Bakkt will offer custodian and warehousing solutions. Bakkt’s plan to act as a bitcoin custodian is already a fairly common occurrence throughout the cryptocurrency landscape. For example, there are several bitcoin exchanges these days that also act as the custodian of their customers’ bitcoins.
In terms of its warehousing services, Bakkt will become the first exchange to offer warehousing of bitcoins. Why? Because Bakkt is the first futures exchange to provide physical delivery of bitcoin futures. Therefore, a warehouse is necessary in order to comply with commodity regulations.
For example, the CME offers warehousing solutions for many of its futures contracts. This would include contracts such as soybeans, corn, hogs, cattle, gold, and silver. All physically delivered futures contracts require warehousing.
Although Bakkt has not made a formal announcement, the exchange has plans to offer merchant services solutions to retail merchants eventually. This explains why Starbucks has partnered with Bakkt. This is simply another way for Bakkt to expand the mainstream use of Bitcoin and other cryptocurrencies.
Bakkt is Not in Direct Competition with Digitex
Digitex Futures is on the verge of opening a cryptocurrency futures exchange. Digitex will offer futures trading in BTC, ETH, and LTC. The beauty of Digitex is the fact that it offers commission-free trading. There are no fees of any kind.
Additionally, Digitex has minted its own native cryptocurrency, DGTX. The token will be used by members of the crypto community who trade on the Digitex platform. All activity will be denominated in DGTX. This includes account balance, daily profit and loss, margin requirement and tick value.
In addition to commission-free trading, Digitex is providing its customers with a unique user experience by allowing account holders to maintain their funds outside of the exchange. In other words, Digitex has no control over customers’ account balances and is a non-custodial exchange. Instead, account balances are held on the Ethereum blockchain.
In terms of the futures platform comparison between Digitex and Bakkt, these exchanges are not competing for the same target market. In other words, both exchanges will capture the attention of two different user groups in the cryptocurrency universe.
For example, Digitex is much more interested in attracting the attention of active retail traders who are searching for an exchange that offers liquidity and low fees. Conversely, Bakkt is more focused on the institutional client who is looking for a “one-stop shop” of custody, warehousing, and merchant services.
If we compare Bakkt’s Bitcoin futures contract against the Digitex contract, Digitex is easily the better choice, particularly for the active retail crypto trader. Digitex offers a commission-free trading experience, more attractive contract specifications and there are no custody concerns with Digitex. If you’re searching for a cryptocurrency futures exchange with deep liquidity and commission-free trading, the Digitex Futures exchange is for you.
One more thing to take into consideration as part of a crypto futures platform comparison: Many people in the crypto community believe that the opening of Bakkt is not beneficial to the future direction of the cryptocurrency universe. They claim that Bakkt will “institutionalize” Bitcoin and other digital assets, thus destroying the original intent of Bitcoin as outlined in Satoshi Nakamoto’s white paper. To a certain extent, they are correct. Bakkt’s objective is to bring cryptocurrencies to main street. In other words, Bakkt wants cryptocurrencies to become a mainstream asset class (like stocks and bonds).
Personally, I believe Bakkt will be a “net positive” for Bitcoin and other cryptocurrencies because it will introduce more users to digital assets. More users equals more volume on the various cryptocurrency exchanges. This is great news for Digitex. Increased volume means there will be more Digitex traders, which will boost the demand for the DGTX token.
Cryptocurrencies are on the verge of becoming a major asset class within the next three to five years. Crypto trading volume will continue to grow exponentially well into the future and one of the biggest beneficiaries will be Digitex and the DGTX token.
Digitex Futures writers and/or guest authors may or may not have a vested interest in the Digitex Futures project and/or other businesses mentioned throughout the site. None of the content on Digitex Futures is investment advice nor is it a replacement for advice from a certified financial planner.