How Will Bakkt & Bitcoin ETFs Influence The Cryptocurrency Industry

As 2018 is coming to an end, people are preparing for the future improvements that cryptocurrency needs to be a safe place for the investors. Among the most important and discussed things in 2018 – There’s the launch of Bakkt and a Bitcoin ETF in USA. Both of them are expected to be live in 2019, but how could these change the cryptocurrency industry? Why are people waiting for them?

What is Bakkt Exchange and Bitcoin ETF?

Bakkt Exchange, a business that will launch in a few weeks, is a cryptocurrency platform which will offer a broad list of services such as trading or warehousing. What makes it special though, is the fact that Bakkt is a product by the same company that launched the New York Stock Exchange – and which plans to enter the market with the support or a few large companies. BCG, Microsoft and Starbucks are a few of the names that will support and will probably have a partnership with Bakkt.

Bakkt will also support cryptocurrency to FIAT conversions and expects to move up to $270 billion per year. Starbucks will be one of their testing companies, that will allow users to convert crypto into U.S. dollars to use it at Starbucks. They claim to be a platform especially made for ‘institutional, merchant and consumer participation’:

“Bakkt is designed to serve as a scalable on-ramp for institutional, merchant and consumer participation in digital assets by promoting greater efficiency, security, and utility,” Bakkt CEO Kelly Loeffler said in the statement. “We are collaborating to build an open platform that helps unlock the transformative potential of digital assets across global markets and commerce.”

A Bitcoin ETF would be a way for the institutional investors to track the performance of a particular asset – in this case, Bitcoin – without actually owning those assets. Its a simpler way for people to invest in Bitcoin without going trough the complicated process of purchasing the Bitcoin, storing it and keep themselves away from scammers. There’s a whole lot of people that chose not to invest it it as it was risky. Not because of the price volatility but for the hacking/scamming/phishing techniques that people use to get someone else’s bitcoins.

By having a look at the Gold ETF, we can understand why something like this is necessary on a market. There are people that use Bitcoin for day to day transactions, sending money abroad or paying for services. And then, there are people that wants to trade it, to benefit from the price increase. The Gold ETF increase over time from $232 to over $1,5000 an ounce. The first Gold-backed ETF in United States was born on November 18th, 2004. Since then, GLD increased from $44 to almost $180 and is now trading around $118.

People chose the most convenient way. Most of the gold investors purchase it because they know it will increase in value or because they wanted to store value. And all this fuss without actually having to own physical gold in their home – that could be stolen one way or another. And a Bitcoin would be much easier to stole – giving an investor not being familiarized with the best practices. That’s why people would prefer a Bitcoin ETF to invest in it, rather than purchasing a hardware wallet or storing the bitcoin on a paper wallet.

According to a LendEDU study on 1,000 adult Americans that invest in stock market through a brokerage account that dont have a cryptocurrency option:

  • 52% of respondents would likely use their brokerage accounts to invest in cryptocurrency if the option existed. 59% of those consumers would even scale back their traditional investments to invest more heavily in cryptocurrency.
  • 41% of respondents would trust a traditional brokerage more than Coinbase in handling their virtual currency investments, while 14% would trust Coinbase more. Further, 39% would trust Amazon more than Coinbase in handling crypto-investments, while 15% opted for Coinbase.
  • 48% of poll participants would likely consider moving their portfolio to a brokerage account that allows them to invest in both cryptocurrency and traditional investments.

Will Bakkt & Bitcoin ETF Change The Cryptocurrency World? 

The short answer is: most probably yes. Traditional investors are use with their asset being 2-5% down. Or even more. What they’re not used to is their investment being stolen.And that’s a huge issue, especially for companies that invests billions in the traditional markets. They’d rather earn only 50% safe per year than a possible 1000% with a high risk of losing everything.

That’s why there’s a need for this. Because the investors want security and Bakkt & the future Bitcoin ETF can deliver it. Will this 100% increase the Bitcoin’s value? Probably not. No one can guarantee such a thing, but it would open doors to investors with billions of dollars that may or may not invest. Would this be beneficial for Bitcoin? Depending on the point of views.

On the first hand, the volatility would  decrease because the volume would increase and the supply and demand will probably reach a balance. There would be people that would trade Bitcoin and there would be the people using it. Without such a high volatility, its main purpose of being a peer-to-peer eCash can be fulfilled. But of course, Bitcoin being added to an ETF and having an institutional exchange would also decrease the decentralization – as people would no longer be in control of the most bitcoins on the market. Instead, most of them would be owner by corporations or users which won’t use it, but they’ll keep it as an investment. Therefore, the volume of Bitcoin active on the cryptocurrency exchange would probably be lower as most of the investors would use these new services.

But, this will highly increase Bitcoin’s adoption. We could see a lot of merchants accepting cryptocurency as a way of payment. We could see a lot of investors switching to cryptocurrency as its a new market with a high potential. And we could see some new regulations regarding Bitcoin and other cryptocurrencies.

Conclusion

The expected “Holy Grail” is yet to come. Bakkt & the Bitcoin ETF might be a way to attract institutional investors. It could also pave the way for a higher adoption. In terms of price, they could make Bitcoin regain some of its lost value. So, if everything that matters for you is getting a profit out of cryptocurrency – Bakkt and the Bitcoin ETF could be the ones that could help the market ‘be great again’. If you’re wondering about the Bitcoin’s future as a peer-to-peer eCash – it won’t probably be the best thing – as people would probably buy it as a store of value.

Image Source: CoinGape

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