Despite the hype in the second half of 2019, Bakkt’s performance was dull to say the least. Compared to its competitors in the Bitcoin futures and options markets, such as CME Group and Deribit, it has recorded significantly lower figures in recent months.
In particular, Bakkt’s options market has recorded significantly lower daily volumes than Deribit, OKEx, CME and LedgerX and has lagged behind its competitors in both the US and international markets.
Is there a lack of institutional interest in Bitcoin, or is it just Bakkt?
Throughout January, despite Bitcoin’s 50% increase, the option volume of Bakkt was virtually non-existent. It remained close to zero for a whole week, which raised questions about institutional participation in the rally.
However, given the high volume of Bakkt’s competitors, it can be argued that Bakkt is simply not attractive for accredited investors and institutions in the market. Su Zhu, the CEO of Three Arrows Capital, said that ICE’s largest shareholder asked about Bakkt’s low market share in the Bitcoin options and futures markets. ICE, the parent company of the New York Stock Exchange, also operates Bakkt.
“I HAD LUNCH LAST WEEK WITH ICE’S LARGEST SHAREHOLDER. HE ASKED WHY BAKKT COMPARED TO BITMEX, DERIBIT ETC. COMPARED TO BITMEX, DERIBIT ETC. I SAID: 1) EXCESSIVE DEPENDENCE ON CLEARING BROKERS 2) CAN’T MAKE A MARGIN IN BTC 3) CAN’T TRADE AROUND THE CLOCK 4) CAN’T TRADE WITH SMALL SIZES 5) 10X EXPENSIVE”.
For a good part of 2019, Bakkt was the hope for the cryptos market. It was often described as an important catalyst for Bitcoin’s next upturn, as investors predicted it would serve as an important infrastructure for institutions.
However, Bakkt struggled to meet investors’ expectations and was unable to catch up with the CME Group on the futures market in terms of volume.
Still not enough
According to Bakkt Volume Bot, which tracks both daily and weekly volumes of the Bakkt Bitcoin futures market, the company processed weekly futures contracts worth approximately $75 million in January and February.
In sharp contrast, CME has processed approximately $500 million daily over the past two weeks, effortlessly exceeding Bakkt. Given the high volume of CME and the steady inflow of capital into platforms such as Coinbase Custody and Grayscale’s Bitcoin Investment Trust (GBTC), it would be premature to claim that there is a lack of institutional demand for Bitcoin.