Bakkt’s unsuccessful launch is no surprise

From concept to go-to-market, the firm’s highly-anticipated roll-out of Bitcoin futures was full of false assumptions and misguided decisions

It was supposed to be the biggest Bitcoin event of the year.

Bakkt was touted by its creators as a game-changer for the crypto industry. Its much-hyped, eagerly anticipated launch of physically-settled Bitcoin futures contracts was described as a revolutionary product offering.

Advocates believed Bakkt would help unlock massive new demand for Bitcoin. They argued that major institutional investors, who were previously sitting on the sidelines, would enter the market and confidently trade Bitcoin.

After almost a year of delays, on September 23 the wait ended. Bakkt finally went live.

And then, welp, reality sank in.

Oops.

Measly 105 futures contracts settled on Bakkt’s first day of operation, with only 72 Bitcoins trading hands. This resulted in about $710K in overall volume. By the end of the first week, Bakkt’s BTC futures volume remained remarkably low, hitting less than $6 million during that period.

Almost one month in, activity on Bakkt’s platform seems to have dropped off even further. Most notably, on October 8 traded contracts plummeted to a new daily low of 25 BTC.

To put things in perspective, rival exchange operator Chicago Mercantile Exchange (CME) first day futures volume was 5,298 BTC, a whopping 75x more than Bakkt.

Back in December 2017, CME’s first day volume represented about $100 million in BTC trading volume. During its first week of trading, CME saw $460 million in BTC futures trade hands via cash-settlement using its systems.

Some may point out that comparing Bakkt’s launch to its competitor isn’t fair given CME’s BTC futures roll-out coincided with the ICO boom and overall crypto craze of late 2017. However, this claim doesn’t explain the current market dynamics.

Despite both Bitcoin and the broader crypto market not rebounding yet to the levels of activity and prices seen in late 2017, CME announced this year that it experienced new record-highs in both volume and open interest.

In October 2019, the company disclosed that “customer interest in CME Bitcoin futures remained strong during Q3 with daily open interest of over 4.6K contracts, up 61% vs Q3, 2018.”

CME also shared that “institutional flow remained strong, with 454 new accounts added, compared with 231 added in the third quarter of 2018.” CME’s daily average trading of Bitcoin futures is now at $289 million, dwarfing Bakkt’s volume.

Given Bakkt’s disappointing launch, the question that looms large is where did it all go so wrong for the $182 million venture-backed company?

In this piece, I flesh out what I view as the primary reasons that led Bakkt to this point.