The big investment people in the rooms aka the institutional investors are the glue for every business prospect, and Blockchain powering cryptocurrency is transforming every sphere. Joining these two blocks, we can solve the puzzle where cryptocurrency can actually solve the crease for the institutional investments, which are already locked into stocks or bonds, among other financial tools.
In addition to the financial benefits, a large surge of institutional money would give cryptocurrency the legitimacy it needs to really make inroads into Mainstream acceptance and adoption. When Goldman-Sachs or Bank of America finally starts basing major business plans around movements in the cryptocurrency market, the thinking goes, cryptocurrency will have graduated from technophile toy to serious financial tool.
Unfortunately, the volatility the sphere is famous for has been out in full force over the course of the last 12 months. After reaching all-time highs in December after a meteoric rise, prices for nearly all cryptocurrencies crashed in January and February and have vibrated at relatively low levels ever since. False starts aside, the market is not considerably more well off than it was just a few days after the crash.
Moreover, the expected regulatory clarity that 2018 was supposed to bring has not yet materialized. There have been few positive news stories on the tax or regulatory fronts, and some financial tools, like Bitcoin exchange-traded funds, have been tabled pending further review.
It would appear, then, that institutional investment is no closer now than it was in January — or the past decade of cryptocurrency trading, for that matter.
Bakkt will reset the magnitude of services related to cryptocurrencies like trading and warehousing. But the thing is, what is Bakkt and how it has earned the acclaimed understanding all of a sudden? Bakkt is just like an institutional investment, which is created by the company that vaunted the mighty bill – New York Stock Exchange. To open the passageway to the mainstream, it will land with the support of different sector stalwarts – BCG, Microsoft, and Starbucks.
Let’s take a step by step route to uncover the market views, projected goals of Bakkt -
An Introduction to Bakkt
In August 2018, Bakkt’s parent company Intercontinental Exchange released a statement announcing its intention to use Microsoft’s cloud service Azure to “create an open and regulated, global ecosystem for digital assets.”
This new company, dubbed Bakkt, would start right off the bat with the inclusion of federally regulated markets and auxiliary services, like warehousing. It would even feature Bitcoin to fiat conversions, a feature that is rare on cryptocurrency exchanges and one of the major differentiators between market-movers and also-rans. In total, Bakkt expects to serve a digital marketplace that moves $270 billion per year.
Eventually, Bakkt hopes to service all levels of the cryptocurrency supply chain, from casual investors to mega-merchants, like Starbucks. In fact, Starbucks will be the first major merchant to work with Bakkt on ways to “convert their digital assets into U.S. dollars for use at Starbucks,” according to Maria Smith, Starbucks vice president for partnerships and payments.
Other investors and potential Bakkt partners include a laundry list of well-known financial institutions, including Alan Howard, Pantera Capital, Fortress Investment Group, Eagle Seven, Galaxy Digital, Protocol Ventures, Susquehanna International Group, and Horizons Ventures.
What the Market Is Saying
It’s likely no coincidence that “Bakkt” sounds suspicious like “backed.” After all, it’s a project of the company that founded the New York Stock Exchange, it’s built on Microsoft technology, it has a slew of big-name institutional investors already on board, and its first major merchant is none other than the ubiquitous Starbucks.
In the wildest fever dreams of cryptocurrency enthusiasts, it’s hard to imagine a more complete slate of market players. All that’s missing is an Amazon endorsement and a gilded letter from the U.S. Securities and Exchange Commission promising Bakkt unfettered access to the market.
And yet, that’s close to the reality that Bakkt is proposing. By beginning operations with an eye toward regulatory scrutiny, Bakkt is attempting to leapfrog the regulatory hurdles that have challenged cryptocurrency throughout its decades-long rise — and in 2018, in particular.
Crypto market observers have identified a few key advantages of this new player, which all seem positive from an adoption point of view.
The first is the obvious nod toward institutional investment. Bakkt has that covered with its initial slate of venture capital firms. If these firms are willing to stick their necks into the crypto arena, so the thinking goes, it’s just a hop-skip-jump for even larger firms to come onboard. This is particularly likely if Bakkt plays by the regulatory rules and secures approval for its operations moving forward.
Oddly, this argument also works in reverse. If big-ticket investors are fine with Bakkt’s operations, then it follows that small-time investors should come on-board, as well. It’s a known fact in the financial world that little money follows big money, the way little fish trail bigger fish to feed on scraps. If a large venture capital firm is confident in Bakkt, the firms that look to it for guidance will follow suit. This has the potential to bring in a slew of capital from previously untouched resources — credit unions, retirement accounts, and 401(k)s. These holdings are averse to any upgrade because they are scribed to hold traditional values which are to prepare the investor for future. The lack of support of institutional investments, the crypto market has to face the fluctuation which further prevented a boost of capital. Bakkt, will sooth the tension floating from the naturally conservative investment vehicles.
This works on a tech angle, as well. Bill Gates, the founder of Microsoft, has been famously hard on cryptocurrency, going so far as to say that it’s killed people in a “fairly direct way.”
And yet Bakkt is built upon Microsoft’s cloud services platform Azure, which implies at least a little tacit endorsement of cryptocurrency as a legitimate entity by the tech giant.
Since Microsoft enjoys a hefty majority share of the personal computing and general software markets, it’s likely that smaller developers will follow in its wake as far as integrating Bakkt’s offering into their own products. Few companies set out to build applications or platforms based on unproven or little-adopted technology. With Microsoft at the forefront, it’s virtually guaranteed that developers will fall in line.
Will it Bring Mainstream Acceptance?
Finally, there’s the real holy grail — Mainstream acceptance. This is often the hardest thing to get. Large financial institutions and technology companies alike burned a lot of their public cloud in the years since the Great Recession of 2008. Large banks caused many folks to lose their homes via complicated and opaque financial movements, and technology companies wantonly sold private data for a profit while neglecting to keep their own systems secure.
In fact, these twin failings are part of the reason cryptocurrency came to the fore when it did.
That said, the retail investor still has most of its money and its tech tied up in these folks, and with that comes a certain level of forced trust. The average person has to believe that Microsoft and their local branch of a major bank have most of their interests at heart. If nothing else, the average person knows they have far more experience in the field.
Up until now, we all understand that crypto is still struggling to garner the acknowledgment from the governments and many big public entities that work privately. In this scenario, Bakkt will flip the scenario for an even acceptance form all public, private as well as government entities. Reason – the likes of Microsoft, Starbucks and BCG opening to the crypto market will propel the digital currency in the daily dealings.