Baked is finally here.
After two delays and 13 months of questioning, the intercontinental exchange-backed bitcoin stock and futures contract facilitator launches Monday, opening the door for institutional investors to take cryptocurrency positions in a federally regulated location.
Trading is set to open at midnight UTC and closes at 10pm. For the first time, interested observers will be able to see how much demand there is among big money traders for this long-awaited service. Bakk's data feed will be freely available until June next year, after which it will require a subscription, according to a FAQs company.
As often mentioned, Bakk's futures will be physically settled, meaning buyers will get bitcoin on expiration, while futures available since 201[ads1]7 on the Chicago stock exchange CME Group are cash-settled – mainly side-plays at the cryptocurrency price.
But what is perhaps most unique about ICE's futures contracts for bitcoin is that they expire after a day. According to the daily contract specifications, bitcoin will be delivered the second business day after the contract date.
For most items – frozen concentrated orange juice, cocoa, what have you – the underlying asset is usually not delivered for at least 30 days (although ICE also offers one-day contracts for silver and gold).
While Bakkt also offers a 30-day futures contract for bitcoin, the one-day version will basically allow institutions to buy or sell bitcoin in a way that is more familiar to them than helper-sheltering the world of crypto exchanges.
Like Lanre Sarumi CEO of crypto derivatives exchange operator LevelTradingField, it said:
cash market but with the opportunity to short. It's huge. "
The contract is" well designed, "Sarumi added." The basis for the cash market would be very tight. It will be interesting to see if it is the management or the follower. In theory, the cash market should dictate the price of the derivatives market. reverse for many goods. "
For this reason, Sarumi said he believes the daily contract" will come out of the gate strong. "
That said, ICE's new futures contracts are unlikely will have a significant short-term impact on the general crypto market, especially given that the company is not looking for private customers, which still make up the bulk of traders.
Bakkt expects significant institutional demand for the futures contract, but it remains to be seen how important it actually is.
"We could see decent trading volumes for the product," said John Todaro research director at TradeBlock, a provider of institutional trading tools. "However, I expect demand to be in line with current cash settlement contracts, such as those offered by CME."
Trading volumes for derivative contracts traditionally exceed trading volumes seen in the underlying spot market, Todaro told CoinDesk.
"As the digital currency space continues to mature, we should see an increase in the volume of these products relative to spot over time."
However, there is little likelihood that there will be an immediate increase in demand. Institutional adoption will not happen with a single catalyst, Todaro said, adding:
"It will take time for these devices to become comfortable with the asset class, identify strategies that are best used to trade the space, understand the liquidity of the crypto market, and also understand the various regulatory and fee obligations across jurisdictions in which they operate. "
It is unclear how much bitcoin has been sent to Bakkt since the New York Stock Exchange opened its warehouse for customers to deposit bitcoin on September 6. Each customer must pledge a security deposit of $ 3,900 to purchase a contract. (Speculators must pledge nearly $ 4300.)
Bakkt has not disclosed any addresses to the custodian's wallet or said how much bitcoin has been deposited since the warehouse opened this month, a spokesman did not answer questions about the case within the deadline.
Caveats aside, ICE launching futures account shades are a significant grip for the industry. Todaro noted that "traditional financial institutions are quite conservative."
"The offer shows that more and more Wall Street institutions are looking more closely at digital currencies and want to get exposure to this new asset class," he said.  It is possible that "some of the recent positive markets moving across digital currencies have been from traders who started the Bakkt launch," Todaro said.
Bakk's launch may be a positive sign for other highly-anticipated products in the United States, such as a listed fund (ETF). Last week. Securities and Exchange Commission (SEC) chairman Jay Clayton expressed concern about the cryptocurrency market's maturity.
Derivatives, such as futures contracts, are more strictly regulated than the underlying spot market, and may be more comforting to regulators and potential institutional customers.
"This offering, in addition to CME, can help regulators become more comfortable with digital real estate and market infrastructure."
Baked CEO Kelly Loeffler image via CoinDesk archives