Bakkt is a digital asset platform. It is designed to connect traditional finance with the crypto market. The Bakkt project was launched with a focus on institutional investors. It offers secure custody solutions, regulated trading, and financial products. The platform aims to make digital assets more accessible to businesses, banks, and institutional investors.
Table of contents
- History of Bakkt
- How Does Bakkt Work?
- Bakkt for Institutional Investors
- Trading and Storing Crypto with Bakkt
- Bakkt and Bitcoin Futures
- Partnerships and Integrations
- Advantages and Disadvantages of Bakkt
- The Future of Bakkt
Bakkt focuses on compliance, security, and integration with traditional financial institutions. It provides institutional clients with an infrastructure that allows them to trade, store, and manage crypto in compliance with all the regulations.
History of Bakkt
The idea of Bakkt appeared in 2018. It was the time when institutional demand for crypto investment solutions started to grow. Retail investors had access to plenty of exchanges and platforms, but institutional investors didn’t have such opportunities. They needed a trusted regulated platform to enter the cryptocurrency market. Bakkt provided an enterprise-grade infrastructure for institutional investors and financial businesses.
Who Founded Bakkt?
Bakkt was launched by Intercontinental Exchange (ICE). It is the parent company of the New York Stock Exchange (NYSE). The platform was developed in collaboration with major financial institutions, including Microsoft and Starbucks.
How Does Bakkt Work?
Bakkt is a digital asset marketplace. It combines regulated trading, secure custody, and payment solutions. The platform is designed for institutional investors, businesses, and retail customers - all those who would like to integrate cryptocurrencies into their financial activities.
Here are the main offerings of Bakkt:
- Bakkt Warehouse: It is a secure custody solution that can be used to store Bitcoin and other digital assets.
- Bakkt Bitcoin Futures: These are regulated Bitcoin futures contracts, they are designed for institutional traders.
- Bakkt Payments: It is a digital wallet service, it allows businesses to accept cryptocurrency payments.
- Bakkt App: It is a consumer-facing application that helps to manage digital assets and rewards.
Bakkt’s Infrastructure
Bakkt offers solutions that are regulatory compliant and offer institutional-grade security. They all are suitable for integration by financial institutions. The main components of Bakkt’s infrastructure are:
- Cold storage and multi-signature wallets.
- Futures trading and derivatives for institutional investors.
- Regulated custody services that meet financial compliance standards.
Bakkt for Institutional Investors
Institutional investors have a lot of requirements for financial solutions. They need compliance, liquidity, and security, and these are the features that the majority of crypto solutions cannot offer. Traditional crypto exchanges often lack the regulatory oversight and infrastructure needed for large-scale institutional trading. Bakkt solves these issues. It offers:
- Regulated futures trading to hedge crypto exposure.
- Secure storage solutions for large digital asset holdings.
- Seamless fiat-to-crypto integration for financial institutions.
Bakkt provides a regulated and safe environment to trade, store, and manage digital assets. It is also easy to integrate for financial institutions. This is why Bakkt is a good option for hedge funds, banks, asset managers, and other financial businesses who want to add crypto to their portfolios.
One of the biggest advantages of Bakkt is its regulatory compliance. The platform operates under strict financial regulations. It has a license from the U.S. Commodity Futures Trading Commission (CFTC) for Bitcoin futures trading. Its custody solutions are regulated by the New York Department of Financial Services (NYDFS). It applies the KYC (Know Your Customer) and AML (Anti-Money Laundering) compliance to prevent fraud. This is why Bakkt is suitable for institutions.
Trading and Storing Crypto with Bakkt
Bakkt Warehouse is a regulated custody service for institutions and businesses. It offers:
- Cold storage.
- Multi-signature authentication.
- Regulatory oversight.
Supported Cryptocurrencies
Bakkt initially supported Bitcoin only. But over time, it expanded to support other digital assets, including stablecoins and even tokenized assets.
Custodial Services vs. Self-Custody
Bakkt provides institutional-grade custody solutions. All users’ funds remain secure under regulatory oversight.
Bakkt and Bitcoin Futures
One of the main offerings of Bakkt is physically settled Bitcoin futures contracts. In cash-settled futures traders receive USDT. But Bakkt’s contracts deliver actual Bitcoin upon expiration.
How to Trade Bitcoin Futures on Bakkt
Institutional investors can trade Bakkt Bitcoin Futures through ICE’s futures exchange. This allows them to:
- Hedge against Bitcoin price volatility.
- Gain exposure to Bitcoin even though they don’t hold it directly.
- Trade in a regulated environment.
Bakkt’s Bitcoin futures are important for the crypto adoption by institutional investors.
Partnerships and Integrations
Bakkt has partnered with leading financial institutions, technology firms, and payment providers. The most important partnerships are:
- Starbucks: Users can convert crypto into Starbucks rewards.
- Microsoft. The company provides cloud infrastructure for Bakkt’s platform.
- Mastercard and Visa: They enable crypto payments and rewards programs.
Additionally, some banks and traditional financial institutions use different services of Bakkt.
Advantages and Disadvantages of Bakkt
For investors, Bakkt offers such benefits as a regulated and compliant trading ecosystem, custody solutions, and access to Bitcoin futures and financial derivatives.
The main drawbacks are a limited number of supported cryptocurrencies, high entry barriers for individual traders, and a high level of dependence on regulatory approvals.
Alternatives to Bakkt
The main competitors of Bakkt are Coinbase Institutional (a regulated trading platform for institutions), Fidely Digital Assets (the company offers crypto custody and trading), and CME Group (it offers Bitcoin futures contracts).
The Future of Bakkt and Its Impact on the Crypto Market
Bakkt continues to introduce new features and offerings. Among them, there are plans to increase the number of offered crypto assets, introduce new payment solutions, and make new integrations with the banking services.
Will Bakkt Change the Crypto Market?
Bakkt plays a very important role in the world of traditional finance and the crypto market. It provides a secure, regulated, and institutionally focused platform for digital assets. Bakkt offers futures trading, custody solutions, and financial integrations. With it, the platform helps to connect the world of traditional finance and crypto markets.