Bakkt is a new crypto trading platform that is completely regulated by the US. Learn how it could disrupt similar companies like Robinhod and Coinbase.
Bakkt is a crypto trading platform with serious clout behind it. The company is backed and supported by the Intercontinental Exchange (ICE), which owns the New York Stock Exchange (NYSE). It hopes to rival giants like Robinhood and Coinbase by adding popular features, rewards programs, and Venmo-like payment services that most exchanges lack. By offering new tools for both institutions and individuals, Bakkt is poised to gain a large market share of new crypto investors.
The cryptocurrency market offers investors a wide array of methods to trade, stake and earn income. Derivatives trading, including futures and options, is one popular choice for experienced traders entering the crypto market. Bakkt’s original purpose was to serve as a platform for investors to execute these trades.
Bakkt was launched in 2019 as a trading platform primarily for Bitcoin options and futures contracts. It was founded by the current CEO of ICE, Jeffrey Sprecher, and his wife (former ICE CEO and Georgia Senator) Kelly Loeffler. They hoped to attract mainstream investors and increase trust in the digital assets market. In particular, they had their eye on institutional investors, who may have been turned off cryptocurrency due a perception that it was either just hype or else tied to all sorts of nefarious activities.
However, Bakkt has since expanded its vision to offer a more comprehensive set of tools for cryptocurrency traders, including a user-friendly app, payments services and a digital wallet. In 2021, the Bakkt exchange merged with a special purpose acquisition company (SPAC), VPC Impact Acquisition Holdings, in order to go public. The exchange’s founders have high hopes and aspire that the exchange will draw 30 million users within five years. If this comes true, other applications like Coinbase and Robinhood will need to find ways to stay competitive.
Bakkt is well-equipped to offer attractive programs to an ever-growing set of investors interested in digital asset ownership. Its rewards and loyalty program engages brands that include Starbucks, Chipotle, Marriott Hotels and Alaskan Airlines.
What Makes Bakkt Unique?
Bakkt is an end-to-end regulated digital assets exchange that offers investors high levels of security when it comes to dealing in cryptocurrencies. The company has all the luster of mainstream finance and high-profile connections, while offering many of the same benefits as many other crypto platforms. Bakkt seems to herald a buy-in from a clique of successful traditional investors. Yet what can the platform offer that other more tech-savvy companies like Binance haven’t already? The following is a list of relatively unique offerings that set Bakkt apart from other crypto exchanges:
- Loyalty and Rewards Programs. Bakkt has real industry clout and connections from the world of traditional business and finance. This will likely pay dividends for them, as they can more easily secure partnerships with airlines, restaurant chains and travel companies. With the ability to combine digital asset ownership with access to appealing rewards programs and credit card options, Bakkt should be able to attract a large customer base that will trust the company more based on its partnerships. Bakkt offers users some novel ways to use rewards balances. It gives users the flexibility to use rewards points to buy crypto or air miles, and to convert both to fiat currency. When paired with the Bakky debit card, this gives crypto investors the capability of easily using their digital assets in everyday situations.
- Cryptocurrency Trading. There are countless ways investors can now buy and trade crypto. However, there are few companies that offer so many different options on one and the same app. The Bakkt app is a one-stop shop for users to trade Bitcoin commission-free, manage all of their gift cards, spend rewards points, and send and receive various cryptos using a built-in wallet.
- Payments Services. Additionally, Bakkt offers a Venmo or PayPal-like interface in the app that lets users make payments to each other directly. This could be an extremely powerful feature, as it would be easier than ever for users to liquidate and spend crypto assets. The company also plans to release a digital and physical card system that will work like Apple Pay and will be accepted wherever contactless payment options are supported.
What Does Bakkt Offer Crypto Investors?
Although Bakkt began as a simple exchange for crypto derivatives – one that was eyeing institutional investors in particular – it has since expanded its offerings to include more diverse features for digital currency investors. It also aims to offer the safety and trust of well-known names in traditional finance, with the aim of drawing a wider public into the crypto sphere.
Bakkt seems to be developing innovative products that payment services companies will need to keep pace with as the public finds new ways of transacting. Lately, increased competition from platforms like Robinhood have prompted established brokerages to provide a better mobile experience and commission-free trading for their users. Financial companies will need to adapt and provide more flexible solutions for the public that also integrate digital assets (as PayPal and Venmo have already done).
Bakkt also offers institutional investing services and tools like Bitcoin futures and options trading. Since the platform is completely regulated and transparent, this gives many large investors an opportunity to gain exposure to Bitcoin and, in future, perhaps to other digital currencies as well.
How Does Bakkt Work?
Bakkt will facilitate crypto transactions off-chain in the same manner as Robinhood and other platforms. Bakkt holds large amounts of Bitcoin in cold storage and enables individual and institutional investors to execute their trades securely. Since all transactions on the platform and app are conducted using Bakkt’s centralized, proprietary ledger, they are fast and aren’t subject to blockchain transaction fees or network congestion. However, this is not a pro for those who are true believers in decentralization. Users can also transfer any Bitcoin they hold from the Bakkt platform to their own wallet. This is in contrast to exchanges like Robinhood, which don’t yet have this functionality.
Bakkts offers a completely regulated system and has secured a BitLicense, issued by the New York State Department of Financial Services, which is required for crypto operations in New York.
Final Thoughts
Bakkt takes digital currencies one step closer to mainstream adoption. The company has integrated cryptocurrency ownership with peer-to-peer (P2P) payments, rewards programs and gift card transactions. Institutional investors are also likely to be drawn to the company due to the solid reputation of its backers, ICE and the NYSE.
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