The crypto space anticipated the launch of Bakkt Physical Bitcoin Futures for many months, with the common theory that Physical Bitcoin Futures would provide a way for institutional investors and Wall Street traders to buy Bitcoin (BTC), which would cause an increase in spot demand and price. Unfortunately, based on new evidence it seems that Bakkt’s Physical Bitcoin Futures are actually about the same as the CME Bitcoin Futures.

New data has come to light which shows that Bakkt physical Bitcoin (BTC) delivery numbers are minuscule, with only 15 Bitcoin (BTC) being physically delivered in October and 17 Bitcoin (BTC) in November via the monthly contracts. Apparently only two Bitcoin (BTC) have been delivered via the daily contracts, with most daily contract periods having practically no volume and zero deliveries.

Bakkt has bitcoin bulls excited. Volume is growing exponentially. From a low base, but growing fast nonetheless. But what makes Bakkt special for bulls is not its volume, but how many bitcoins are physically delivered. In November, the number was 17 bitcoins. In October, 15. pic.twitter.com/04R4t6h1do — Alex Krüger (@krugermacro) November 27, 2019

This data was obtained by Twitter user Alex Kruger via the Intercontinental Exchange’s (ICE) data reporting system.

Assuming this data is accurate, this means that only a tiny fraction of Bakkt users are choosing to cash out into actual Bitcoin (BTC), especially considering that trading volume is now over $100 million dollars a week. The Bakkt website shows that Physical Bitcoin Futures contracts can optionally be settled for cash, and it seems almost all traders are choosing to keep their money in liquid cash, which can be used to initiate new trades, rather than tying up their money in Bitcoin (BTC).

It gets worse. When Kelly Loeffler introduced Bakkt in a Medium post on Aug. 20, 2018, she said “A critical element to price discovery is physical delivery. Specifically, with our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded. As such, our new daily Bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset. This supports market integrity and differentiates our effort from existing futures and crypto exchanges which allow for margin, leverage and cash settlement.”

Lo and behold, Bakkt’s daily and monthly Physical Bitcoin Futures are both margined despite Loeffler’s statement. The Bakkt FAQ reveals that Physical Bitcoin Futures contracts are 37% backed with cash and Treasuries, with Bitcoin (BTC) not being allowed as collateral. Equivalently, this means that 63% of Bakkt Physical Bitcoin Futures contracts are not backed by anything, making the market highly leveraged. This defeats Bakkt’s original goal of supporting market integrity and facilitating price discovery.

Also notably, due to customer demand, Bakkt went ahead and launched regular cash-settled Bitcoin Futures with no physical delivery option, which is precisely the same as the CME Bitcoin Futures. Perhaps this is a final affirmation that Bitcoin Futures traders in general simply have no need to settle their contracts in actual Bitcoin (BTC), and would rather keep their funds liquid on the market.

Thus, there are no actual Bitcoin (BTC) involved in the backing or trading of Bakkt Physical Bitcoin Futures, and only a minuscule amount of Bitcoin (BTC) are being delivered when the contracts expire, with most traders choosing to settle for cash. Also, the contracts are margined and the market is highly leveraged. Therefore, the CME Bitcoin Futures and the Bakkt Physical Bitcoin Futures are approximately the same, which also means that Bakkt Physical Bitcoin Futures are unlikely to change the status quo of the crypto market.

Just like Loeffler said, full collateralization, no leverage, and physical delivery would have differentiated Bakkt from the CME Bitcoin Futures while supporting market integrity. With all three of those benefits being removed, Bakkt has no differentiation from the CME Bitcoin Futures and perhaps does not support market integrity.

That being said, trading volumes on Bakkt are just beginning to grow rapidly, and perhaps it is possible that Bakkt physical Bitcoin (BTC) deliveries will increase in the future.