What are the differences between Bakkt and CME futures?
When talking about Bitcoin futures, the great 2017 excitement comes back to memory.
The news of CME Group, at that time, saw the growing interest of the traditional financial world push BTC’s prices to $20,000.
As a result, the launch of these tools coincided with an abrupt slowdown throughout the industry. Betting on Bitcoin’s future at a time of market hyperextension pushed the price towards the Bear market in 2018.
These launches are never chosen at random and a second important futures service has appeared on the market: Bakkt. Now, however, the market is in an opposite phase compared to when the CME was launched. Although they seem similar, the services offered by the two companies are quite different.
The CME Group
This is a company operating in the US financial market and trading futures.
It owns and operates futures and derivatives trading in Chicago and New York and exchange services in London, using online trading platforms.
It also owns the shares of Dow Jones and some financial indices, as well as CME Clearing Services. The derivatives contracts traded also include futures and options on interest rates, equity indices, energy and agricultural assets, rare and precious metals, weather and real estate.
It has been described by The Economist as the “largest financial trading platform”.
CME futures specifications related to Bitcoin:
- Since 2018 the company decided to launch futures dedicated to Bitcoin, thus entering the cryptocurrency world, since then it has been possible to bet on the rise or fall of BTC.
- This service, however, is covered by the liquidity of the group in FIAT and at the close of operations, the contract is settled with dollars. This means that the underlying is only useful as a speculative reference but is not held by either party.
Since it is not an exchange, the market price of Bitcoin on the CME does not depend on its internal trading but refers to the average exchange price of a basket of exchanges such as Bitstamp, Coinbase, Gemini, itBit and Kraken.
Bakkt is promoted by the ICE, Intercontinental Exchange, a group that owns 12 exchanges including the New York Stock Exchange – the largest stock exchange in the world. It also owns minority shares in Coinbase and six Clearing Houses which cover the company’s liquidity.
It has received the license for the custody of Bitcoin from the state of New York.
Bakkt trust company is registered with FinCEN – Financial Crime Enforcement Network – and follows its regulations and guidelines.
Specifications of Bakkt Futures related to Bitcoin:
- Futures with physical delivery at the close of the contract of the underlying asset in Bitcoin through secure and regulated systems have been available since September 2019.
- Storage of the underlying asset in the Bakkt Warehouse, a building equipped with a physical private key storage system provided by NYDFS – New York State Department of Financial Services.
There is no doubt that the Bakkt project is much more ambitious than that of the CME.
On the one side, there is only an exchange linked to a forecast of future price of an asset, on the other, with Bakkt there is an ecosystem that will involve institutions and large companies for the settlement of the underlying asset.
The US giant, through agreements with companies such as Starbucks and Microsoft, wants to establish itself as a bridge also in the payment system.
The paths of adoption are endless, in the world of disintermediation custody is not viewed favourably by the community, but it is an offer that seems to have its own reference market.