Did Bakkt Bitcoin Futures Launch Impact Bitcoin Prices?

Bitcoin prices took an unexpected nosedive in the last week of September. Unexpected because ICE affiliate company Bakkt launched its Bitcoin futures, a feature that was expected to take the crypto industry by a storm in the same week. Most investors are still puzzled, as this event was expected to raise the market prices.

Well, in this article, we will find out why the prices of bitcoin dropped and what impact Bakkt Futures launch had on the market.

Why are Bakkt Bitcoin Futures relevant to the Industry?

Investing in cryptocurrency is a precarious and risky affair. Crypto assets such as bitcoin are very volatile, and prices can drastically drop or rise in a matter of a few minutes. Furthermore, these price movements are mainly driven by market sentiments rather than actual economic events owing to the nature of cryptocurrencies.

The uncertain nature of the crypto market will often push most investors to other sectors. Additionally, cryptocurrency being a decentralized industry is unregulated hence prone to scams and hacks. This further discourages investors from venturing into this sector.

This is where Bakkt Warehouse comes in. Bakkt introduced its bitcoin futures on 23rd September in a much-anticipated event. Futures permits users to bet on the direction which the underlying asset, such as oil, gold, or bitcoin, will take. The launch had one significant advantage:

Firstly, Bakkt is an affiliate of the International Currency Exchange, which owns the New York Stock Exchange. In simple terms, Bakkt is regulated and managed by ICE, which paves the way for cryptocurrencies into the regulated exchange system.

For years, New York has been famous for its unfriendly crypto regulations. Bakkt will be a game-changer. The management of bitcoin under Bakkt will attract more investors who were wary of the risks associated with the unregulated cryptocurrency. Traders expected prices to shoot up after the launch as new investors move in to acquire their share of cryptocurrencies.

Why did the price drop?

The reasons above were enough to create a rise in prices. However, the price drastically dropped after the launch.

Well, big-money investors did not receive the launch with as much enthusiasm as the traders had expected. Small volume traders opened trades immediately after the launch anticipating the big investors to push the prices up. When the investors failed to show up for the party, the panic-stricken traders closed their short term orders resulting in a drop in prices.

The phenomenon is not new to the market as it happened with the Chicago Mercantile Company’s future launch in December 2017. Bitcoin has had its way contrary to what the traders anticipate several times in the past. This was not the first time.

 

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