Bakkt still looking to sign up key core clients after first week of futures trading

Quick Take

Compared to CBOE’s first-week bitcoin futures launch on Dec. 10 2017, Bakkt’s average outstanding interest for the week equated to only 5o basis points of the total CBOE outstanding interest back in late 2017
Bakkt didn’t register enough sizeable reportable traders to hit the CFTC COT report in its first few days of trading
Bakkt still is looking to sign up key core clients, and the historical precedent of CME’s bitcoin product taking four months to see reportable transactions hit the CFTC suggests the jury is still out on the product launch

Bakkt, the bitcoin derivatives trading platform owned by ICE, has completed its first full week of trading. The firm saw 623 monthly physically-settled bitcoin futures contracts traded through its platform—approximately $5.5 million in notional trading value assuming the weekly price of bitcoin at $8,700.

Source: ICE

The weekly CFTC Commitment of Traders report (COT report: published Friday, and using Tuesday’s closing data for that week) shows that there wasn't more than 20 reportable (large enough) traders exchanging the Bakkt product to warrant inclusion in this week's CFTC report.

Using the ICE Bitcoin USD data explorer, we estimate that Bakkt saw ~$5.5 million worth of notional value traded in its first week. In terms of open interest, Bakkt finished the week with 31 open contracts or ~$370,000 worth of notional value. The open interest volume made up less than 15 basis points worth of the total outstanding interest notional value of CME cash-settled futures this week. Compared to CBOE's first-week launch on Dec. 10 2017, Bakkt's notional value of open interest on Tuesday traded equates to 50 basis points of the total CBOE outstanding interest in its 1st week of trading back in late 2017. CBOE also saw 27 traders classified as reportable by the CFTC in its first week of trading.

Indeed, the product launch of CBOE's bitcoin futures was timed during the peak of last cycle's bitcoin price bubble (when bitcoin was trading at around $16,000). It's important to also note that CME's bitcoin futures product, which saw more than $250 million worth of outstanding notional value this Tuesday, took more than four months to register enough reportable traders to hit the CFTC report. Three months later (July 2018) CME made up more than 70% of total notional value of outstanding U.S. regulated bitcoin futures. By May of this year, CBOE paused its bitcoin futures, and ceded the entire market to CME Group.

The upshot for Bakkt? Give the ICE subsidiary some time before judgement, especially considering it needs to lock down key partnership deals.

Bakkt’s goal now will be to sign up several core clients post-launch. As reported by The Block, some of its largest prospective clients still don’t have permission to trade physically delivered futures contracts.

About the CFTC COT Report

The Commitment of Traders Report is a detailed public report that provides a breakdown of each Tuesday’s open interest on futures markets that have 20 or more traders that hold positions at or above reporting levels. The report is published by the CFTC every Friday, and submits the final numbers from the prior Tuesday’s trading close.

CFTC Commitments of Traders, Futures Only

CFTC Commission of Traders, Full Report

*Note we've updated estimated Bakkt numbers to include total weekly volumes, rather than daily estimates. The historical data of Bakkt daily volume and OI can be found here.