The Bakkt crypto exchange has been up and running for well over a month now, and although its opening was more subdued that most Bitcoin enthusiasts would have liked, it is beginning to pick up steam with its institutional clients. Jeffrey Sprecher, the CEO for the Intercontinental Exchange (ICE), the owner and operator of the New York Stock Exchange and of Bakkt, elaborated on a few crypto topics during an earnings call covered by Coindesk. His remarks spoke to Bitcoin’s future and Bakkt’s options offering.
The staff at Bakkt believes that, for Bitcoin to succeed in the marketplace, it must expand its use cases, a primary one being direct usage at the point of sale. The exchange recently announced the development of a consumer app for use at merchant sites, the first being at Starbucks, an early business partner in the Bakkt project. Pundits scoffed at how much impact the app could generate.
Sprecher contends that:
We don’t think that that whole space will be relevant and grow unless there are real use cases and we do … think that a use case is going to be the digital transfer of value through payments. It may well be that, rather than convert bitcoin to fiat currency and then use [that] fiat currency to buy goods and services, merchants and users will accept bitcoin directly.
Cross-border commerce could also benefit by eliminating conversion costs and intermediaries that make today’s process cumbersome, but in order to become truly digital Gold, Bitcoin needs to be used more for value exchange. Sprecher explains:
Because I’m old I think of [how] gold became a store of value because at one point it was a currency. We had gold coins, it was in circulation, and over time because of the nature of its ability to spend, … it became a store of value and today, you know, in a crisis we all accept gold as a form of payment.
Bakkt Options in December
Sprecher also claims that his staff determined very early on that their physically settled futures contracts are a source of price discovery, independent of the global network of unregulated exchanges that dominate the spot market. As such, it then became apparent that an options offering would dovetail nicely with their existing product, thereby giving institutional clients a complete set of tools they needed to both establish, as well as hedge the risk of those positions, but under one roof, so to speak.
The decision to offer options was a not a competitively driven one, due to pre-announced CME plans to offer options. According to Sprecher:
We’re not dependent on the prices that come out of these unregulated cash markets. We develop our own settlement price and so that lends itself very nicely to an options market where people that trade options and hedge with the underlying can have perfect hedging in one venue that they know is transparent. So that was the pressure to get the options out quickly.