Crypto Not Ready For Showtime As Bakkt Exchange Crypto Volumes Lackluster

Entire cryptocurrency industry market cap is just over USD 220B
Crypto industry should focus on products with low regulatory burden
Crypto industry should focus on building products that allow sector participation
Crytpo and Bitcoin Market Cap Story of Day

Crytpo and Bitcoin Market Cap Story of Day





Now Two Weeks After The Bakkt Physical Futures Launch, We Provide A Recap - We Continue To Feel The Product Is Limited In Its Potential To Attract New Institutional Investors To Space - Furthermore, We Believe Any New Crypto Product Marketed Towards Institutions Will Require A Sales Effort Focused On Alpha Opportunities.


In the days directly following the Bakkt launch, the monthly contract, which is proving to be more popular than the daily contract, traded consistently above 100 BTC equivalent. Since then volumes have declined drastically with the monthly, most days this week, trading less than 20 BTC equivalent. There has been plenty of press coverage with everyone from CoinDesk to Bloomberg pointing out the low volumes. An analyst from Oppenheimer went so far as to write a positively-veiled report on the launch as apart of their coverage of Bakkt parent, ICE.


Crypto Takeaway: 

We've already belabored the point that we do not feel a physically settled future does much to solve some of the issues restricting institutional participants in the space. Leaving that aside, however, we also believe it is naive to think there is massive latent institutional demand wanting passive exposure to bitcoin. The last leg of crypto/bitcoin adoption focused on a beta-centric, retail-focused pitched that claims that the world is in the midst of a generational wealth transfer as the financial system switches to bitcoin (or something similar). While that has been extremely successful in attracting retail, it is far less appealing to an institutional investor who has quarterly return benchmarks and cannot passively hold an asset as volatile as bitcoin. What is appealing from a trading standpoint are the alpha opportunities in the space. Due to a high level of retail participation and market fragmentation crypto offers tradeable market inefficiencies that have not been experienced for decades in traditional finance. We feel as though any targeted institutional trading product in the space will also require a sales effort that highlights and pitches those alpha opportunities.

About the Author

FRNT Financial is a technology and sales layer that offers institutional and accredited investors access to various forms of exposure to crypto-assets.