Physically Backed BTC Futures by Bakkt

Bakkt, scheduled for a November launch is the cryptocurrency exchange developed by Intercontinental Exchange (ICE) in association with Microsoft, Boston Consulting Group, and Starbucks. ICE runs exchanges across 23 countries around the world. Now, Bakkt spokesperson have confirmed the future contracts of Bitcoin upon expiration will be delivered in real bitcoins.

Bakkt’s Twitter announcement:

“Our first contracts will be physically delivered Bitcoin futures contracts versus fiat currencies, including USD, GBP and EUR. For example, buying one USD/BTC futures contract will result in daily delivery of one Bitcoin into the customer’s account.”

Settlement in real bitcoin is a boon for investors confidence. The importance is highlighted when completion of such settlements often causes more contracts to be issued, traded and settled in cash rather than in the underlying. Upon an unexpected claim on the underlying asset (of the future contract) by forces of free market, prices can change chaotically, often disrupting the market itself in a bigger scale. In a famous example, legendary investor Warren Buffett single handedly increased price of commodity metal silver by 60% in few months by taking delivery of future contract rather than settling in cash. The scarcity of the underlying asset, in this case physical silver metal, compared to amount of paper silver future contracts traded was exposed. Thus, ability to claim real Bitcoins upon the expiration of Bitcoin futures by Bakkt discounts the possibility to paying more later for the same Bitcoins due to previously unrealized proportion of future contracts to the real underlying assets. By the end of year, these features are expected to be fully functional.

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