Economist Alex Kruger has been forced to clarify his remarks on Bakkt Bitcoin Futures, after his analysis set off a firestorm.
Everybody needs to chill: Bakkt Bitcoin Futures is not a scam and they haven’t really ‘stabbed us in the Bakkt’, even if it’s not living up to the original hype.
“Some are using my Bakkt tweets to say Bakkt is a scam and things along those lines,” Kruger clarified in a tweet a few hours ago. “Bakkt is not even remotely a scam, that’s a ridiculous idea.”
The outrage directed at Bakkt came about after Kruger undermined some of the original marketing claims and myths surrounding Bakkt.
Bakkt futures are no panacea, yet are a positive development for the bitcoin market. Some are using my Bakkt tweets to say Bakkt is a scam and things along those lines. Bakkt is not even remotely a scam, that's a ridiculous idea.https://t.co/KJdAaveAN6
— Alex Krüger (@krugermacro) December 4, 2019
As the name suggest, Bakkt is supposed to be a physically backed futures contract settled in actual Bitcoin (rather than cash like CME futures).
By settling in Bitcoin, the idea is to prevent the price manipulation associated with other futures products and to enable better price discovery.
Bakkt is not actually backed by Bitcoin
However Kruger says that most contracts are simply paper trades that are rolled over. Only 15 BTC were actually delivered in October and only 17 were delivered in November.
“Some believe Bakkt’s volume is fully backed by Bitcoins. This is not even remotely the case. Almost nobody takes physical delivery.
There’s no doubt that Bakkt is still making much of it’s ‘physically settled’ status to differentiate itself from CME.
Jennifer Ilkiw, Vice President of Intercontinental Exchange Asia Pacific and Head of Business Development for Bakkt, told Micky recently that tying Bakkt’s forthcoming cash-settled futures in Singapore to the physically delivered one would enable it to combat market manipulation in a way CME was incapable of.
Podcaster Chico Crypto seized on Kruger’s analysis as the basis for a new podcast titled “Bakkt’s evil agenda exposed! Bakkt isn’t backed by Bitcoin.
And there were plenty of outraged tweets from Bitcoiners who felt let down.
it is not a myth – it was a blantant lie by #bakkt – what kind of people do business with a business built on a lie. very trustworthy…but at least it can get you a space in the us senate …
— Phila on the Rise (@cryptopunkpoet) December 5, 2019
Another twitter user @IAMGRATEFUL13 wrote simply: “Stabbed us in the BAKKT” – which is so good, we’ve stolen it for our headline.
However Kruger added: “This is not a problem. It is normal for futures traders to not take delivery in all assets. But Bakkt is no panacea.”
Bakkt has made no secret of this change in direction
More than a year ago Bakkt CEO Kelly Loeffler (now a US Senator for Georgia) announced the Bakkt daily futures contract would be “fully collateralized” and “not traded on margin, use leverage or serve to create a paper claim on a real asset.”
However, by May this year he’d changed his tune and said Bakkt contracts would require initial margin, and at launch, margin requirements were set at a rate of 37%.
In fact it’s all laid out on the website and Kruger included a screenshot of the FAQ, adding:
“Bakkt futures is 37% backed by dollars or treasuries”.
Kruger concluded that Bakkt’s monthly futures are very similar to CME futures.
Would love to get @krugermacro take on this. Has @Bakkt outright lied or twisted the truth? Publicly stated 'fully collateralised' & 'bitcoin contract will not be traded on margin, use leverage or serve to create a paper claim on a real asset.' https://t.co/fss3AsnGD9
— Alex Saunders ???????????????? (@AlexSaundersAU) December 4, 2019
Bakkt could still be ‘very positive’
However, he went on to add that Bakkt still has a regulated and fully insured digital assets warehouse plugged to Intercontinental Exchange.
“If Bakkt eventually manages to generate meaningful physical demand from institutions, that would be very positive for both the industry and price.”