The grim side of Bakkt's potential consequences

It is not just them, it's also us.
You are reading about: "The grim side of Bakkt's potential consequences"

By Chris A.

Published September 28, 2018

Last month, Bakkt was still firmly in the shadow of cryptocurrency ETF proposals. Come September everything changed and the current Bitcoin community agenda regarding Bakkt seems to be one hundred percent neon pristine positive.

It is always worth being careful about new projects, particularly ones with this overwhelmingly consistent response in a space like bitcoin markets and technology.

There should be some polarization in the community, it only shows there is development potential happening from bottom up.

Without disagreements, how can the blockchain space claim it is decentralized, and how different would the community be from a scripted TV debate or personalized Facebook agenda pushing?

The thirsty traders

As it appears now, the dire market conditions messed with the appetite for decentralized governance significantly.

In August 2018, freshmen cryptocurrency investors from late 2017 and early 2018 were getting exhausted by the prolonged downtrend in the fiat value of all cryptoassets.

While there is always a lot of silent people doing their thing as the bitcoin OTC volume estimates suggest, the public community voice was clear: There was a bubble after all, the correction has been long and exhausting, we need some fundamental positive news to justify a turning point.

In other words, We need someone who actually has money to invest, unlike us at this point, to start buying. Perhaps the ETF will do that?

Fuck the ETF, sure it can help price but why isn’t the Bakkt Project by ICE (the guys who own the fkn New York Stock Exchange) being hyped? It’s way more bullish. Physically backed futures contracts. That means they must buy the actual BTC, not like the BS futures we have now that don’t require the underlying asset to trade. ICE will have to buy up a ton of BTC and store it. Increase in price and reduced circulating supply. Win-Win. / Reddit, August 2018

This is not the place for Satoshi visions and other memes, rather it is that the community response prompts a simple appeal to common sense:

  • Are you really participating in a capital market and relying with your decision making judgement on the conventional public opinions?
  • With this mindset, would you have ever bought a cryptocurrency at any point in time before the bulk of 2017’s gains became publicly acknowledged?

Who criticizes Bakkt

With the majority of the community being stoked about potential relief from the bear market, there is not a lot of criticism based on ideology this time. When someone already brings up a point against Bakkt, it tends to be very factual.

And there is every opportunity to do so, for anyone who is interested: Bakkt project has a landing page and a blog but as of end September 2018, the content of both is marketing speak exclusively. Facts or responses to questions are sparse and vague.

At this stage, even an airdrop that distributes for a mailing list sign up gets questioned harder.

Not your keys, not your Bitcoin

“An ETF is a multibillion-dollar ‘not-your-keys-not-your-Bitcoin’ vehicle. That is why I am against it,” Andreas Antonopoulos said to the Bitcoin ETF obsession - an argument that applies the same to the Bakkt’s cryptoasset custody offering.

According to Antonopoulos, the implication of this big a market for “second-tier investors” is the power over consensus gained by actors who are not personally interested in the state of the network because they do not hold their own private keys.

Recalling the 2017 Bitcoin Cash fork and many other Bitcoin forks that followed, the pivotal point for most of them was the decision of major cryptocurrency exchanges to either support or disregard the forked coin. With bigger institutional investors coming to the market, should the fork pattern repeat, they will be the majority.

Nick Szabo similarly argues at this point the legacy products “might cause more problems than it’s worth”, as quoted by Bitcoinist.

The correlation of price with Bitcoin network activity

The symbiont.io president and Wall Street veteran Caitlin Long was similarly concerned about how forks will be handled by Bakkt, a question that was raised but left without an answer from Bakkt.

Long also criticized the fact that client collateral will not be held segregated for each client but in a single account (“commingled”) and that it will employ fractional reserve backing practices (“rehypothecation”).

While Bakkt futures will not offer explicit leverage, the two practices mentioned will effectively enable clients to trade with more Bitcoin than there is.

That weakens Bakkt’s contribution to price discovery and removes a degree of transparency from Bitcoin trading.

At the current state of Bitcoin markets, price action is still very much correlated with network activity and cryptocurrency exchange positions data, both of which are easily accessible in real time. Due to the hidden leverage, Bakkt trading could potentially cause events that will be divorced from metrics observable by the retail trader.

The fresh opportunity

Right now though, it appears that the business of capital management needs cryptoassets one way or another.

Elon Musk recently tweeted that he is considering taking Tesla private at 420 USD. Whether it was meant seriously or not, it has drawn the attention to a bigger problem: Due to increasingly strict regulations, the number of publicly listed companies in the US has fallen steadily since 1997.

In fact, more companies have delisted than gone public in every year of the past 20 years except the single year of 2013.

One of the implications of this situation is the damaging effect it has on portfolio management. It simply becomes more difficult to build a diversified portfolio when you don’t have a diversity of stocks to choose from, to quote the US Global Investors report written by Frank Holmes on 10th August 2018.

The report identifies cryptocurrencies and blockchain technology as a potential opportunity for investors who look to diversify.

The long-enough timeline?

It seems all of the critics of Bakkt point to a single issue: While it is laudable to pioneer a crypto custody service and to set the compliance standard for others, Bakkt’s own biggest edge seems to be in creating a silo of information about a market that, given the public trading conditions in the US, may later become crucial.

Even so, there are people who believe that ultimately Bakkt’s model will fail:

“A regulated exchange with a custodian may be popular for a short period of time, but it’s not the future. The future will be the original idea of a peer-to-peer network,” says Abhishek Punia, a cryptocurrency analyst at Draper Associates, one of the VC firms that are most active in the blockchain technology industry.

After all, silos are prone to conflicts of interest and the difference from legacy finance is rampant here: Nobody is a prisoner of the only available system; unless the Earth’s electricity gets completely shut down, anyone will always have a possibility to interact with blockchains in a non-custodial or even fully decentralized manner.

If the Bakkt hype is to be taken seriously though, no flight to decentralization is likely to happen before an impactful damaging incident.


Full Data File: Bakkt (Full Data File) in Crypto Intelligence

Presales and promos success, social media presence, location...
We are also on medium.com/cryptolounge - follow us!

Filed under: Analysis

Blockchain industry brand names mentioned in this article:

*BAKKT


Bakkt (Full Data File)

Crypto Intelligence

Presales and promos success, social media presence, locations, related companies...

See The Data File

The Day in Crypto

#CryptoMastery

Data is beautiful

Brand development in forex and crypto: Most expensive domain names [Infographic]

Crypto infographics - Most expensive domain names in forex and crypto. Targeted brand development in forex and crypto with domain names.

Published October 12, 2018 by LK / forexnewsnow
Editor's note: Infographic | Crypto and forex brokers opt for a really crisp domain name.
Tagged as Infographics

Top 8 Women in Blockchain Technology [Infographic]

When it comes to women in crypto, the pre-2016 OG heads will probably come up with names like Alena Vranova and Blythe Masters. Alena Vranova is the former CEO of Satoshi Labs, the company that...

Published November 14, 2018 by Guest
Editor's note: Two OG crypto women that you don't hear much of anymore plus a crypto infographic about 8 women who work in blockchain tech.
Tagged as Infographics

Blockchain Consortium in Trade Finance: 6 Notable Networks [Infographic]

The success of trade finance blockchain implementations depends on how widely they are adopted. That's why we have seen businesses form consortia based on similar interests.

Published October 21, 2018 by Guest

Tagged as Infographics

Comparing Forex Market with Cryptocurrency Markets [Infographic]

One of the few metrics that cryptocurrency markets have in common with the forex markets in 2018 is the high percentage of total trades being located on few most popular markets.

Published June 10, 2018 by Guest
Editor's note: Still a long way to go for crypto markets.
Tagged as Infographics

Blockchain Technology 101: Blockchains, Blocks and the Role of Price [Infographic]

Blockchain technology 101: What is blockchain, what types of blockchains exist and what role does the cryptocurrency price play.

Published July 31, 2018 by Guest
Editor's note: What is blockchain, what types of blockchains exist and what role plays the price of cryptocurrencies.
Tagged as Infographics

Real-world companies that accept crypto payments [Infographic]

Infographic - Graphic map of businesses that let customers pay in bitcoin.

Published May 31, 2018 by Guest
Editor's note: Graphic map of businesses that let customers pay in bitcoin.
Tagged as Infographics

Infographic: Blockchain Hacks & Crypto Trading Platform heists 2018 vs 2017

Blockchain infographic comparing the biggest crypto heists of 2018 and 2017. In 2017 the focus lied more on ICOs, smart contracts and wallet.

Published July 10, 2018 by JMT
Editor's note: In 2017 the focus lied more on ICOs, smart contracts and wallet.
Tagged as Infographics

15 crypto kings that are making history with their engagement in the field of cryptocurrencies

Coining The Bucks With Cryptocurrencies Have you ever wondered how much masters of the cryptocurrencies are worth? Like the guy who founded Ethereum, or the one who started Ripple, for example. The answer, in short,...

Published May 30, 2018 by Guest
Editor's note: Infographic: 15 ultra-rich blockchain entrepreneurs and how they get into crypto
Tagged as Infographics

The Good And The Bad Of ICOs

Infographic: The good and bad of ICOs - Which token sales raised the most money in 2018?

Published May 30, 2018 by Hristina
Editor's note: Despite the DAO failure, ICOs grew into an established form of startup funding.
Tagged as Infographics

How Blockchain Disrupts Business [Infographic]

Published May 31, 2018 by Guest

Tagged as Infographics

How to spot cryptocurrency scams

Published May 30, 2018 by Guest
Editor's note: Infographic by the NOAHcoin team
Tagged as Infographics

All Infographics

Industry News Releases


Comments

comments powered by Disqus
About the Author
By Chris A.

BIO: Chris belongs to the crypto trader class of 2013 and he's mostly writing on the topic of crypto trading and security. Located in the Americas most of the time, but you're most likely to meet him on Reddit as u/KarlVonBahnhof. ·

Also by Chris A.

Powered by Contentful

AltcoinTrading.NET