Bakkt’s intention to provide a pure non-leveraged Bitcoin futures product seems to have evaporated — both of the firm’s futures contracts are traded on margin, as pointed out by Alex Kruger:
“Myth: Bakkt futures fully backed by bitcoin. Reality: Bakkt futures 37% backed by dollars or treasuries.”
More than a year ago Bakkt CEO Kelly Loeffler announced that the firm’s debut daily futures contract would be “fully collateralized” and “not be traded on margin, use leverage, or serve to create a paper claim on a real asset.”
This, she assured, was a natural decision given Bakkt’s commitment to supporting “market integrity” and “trusted price formation” within the cryptocurrency market, an ideological purpose of distinction that supposedly set the firm apart from the incumbent cash-settled BTC futures contracts at CME group and the now-defunct CBOE offering.
Going “Bakkt” on their word?
Expectedly, the notion of a physically-settled, non-leveraged BTC futures providing was widely praised within the crypto community, a group that has usually described the cash-settled CME and CBOE contracts because the establishment’s means that to control Bitcoin (to this day the two contracts are suspected to possess been behind Bitcoin’s sheer decline in December 2017 down from its all-time high).
In May this year, Loeffler walked back these statements and spoke of Bakkt contracts requiring initial margin, justifying the changes by saying they were “consistent with capital-efficient risk management practices in global futures markets.”
And so upon launch in Sept, margin needs for the flagship daily and monthly futures contracts were set at a margin rate of 37 percent (now $2,850 per BTC at current levels), effectively doing away with the original promise of a futures contract fully backed by Bitcoin.
A number of theories exist to elucidate this quiet reverse, as well as the additional cynical assumption that the initial guarantees were empty exercises in virtue-signaling meant to differentiate Bakkt’s whole from its competitors.
According to Kruger, Bakkt might have pivoted in response to traders saying they were fair within the daily settlement of physical BTC — this could justify why Bakkt’s daily futures contract has had announced trade volumes of zero most days since launch, furthermore because the firm’s call to launch a cash-settled monthly contract on Dec. 9.