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Exit the Bear Run?


Cryptocurrency has had a prolonged bear run since January of 2018. Many have lost faith, and may have sold their investments. If you've managed to hold (or HODL) through all of this recent turmoil, I believe you are soon to be handsomely rewarded.


When can we see this bear run finally end? My best guess is that the mid-October time frame will begin the next bull run and crypto will experience some significant gains. No, I'm not tying this prediction to the bull run that happened at the end of 2017, although I will admit that the timing is strangely similar. This prediction is based on a solid bit information. Bakkt is coming in November.


WHAT IS BAKKT?


Intercontinental Exchange, a leading operator of global exchanges, announced this summer the formation of Bakkt, a company which aims to create the largest US-regulated global platform for consumers and institutions to buy, sell, store, and spend digital assets. Investors would purchase a digital asset (which would be defined as a commodity for the purposes of US regulators) through a broker-dealer (regulated as a member of the ICE futures exchange).


In a similar move, Citigroup (which already allows Americans to own foreign stocks through a custodian) will reportedly offer crypto custody solutions through Bakkt to institutional investors. If approved by US regulators, it's "Digital Asset Receipt" will allow investors to securely invest in crypto assets. A custodian firm, Depository Trust & Clearing Corp, would provide secure storage of the crypto assets.


Bakkt is targeted, however, to be a far more comprehensive solution, addressing more than just simple custodianship. If Bakkt's aims are realized the company will be able to resolve several issues that have longed been seen as impediments to crypto adoption and investment:


  • The ability to detect and deter crypto fraud and market manipulation in a substantially large federally regulated market.

  • Permitting an exchange to securely store investor holdings under US commodity regulations

  • Expanding the capacity of Bitcoin so that it can handle more transactions (albeit off-chain initially)

  • A way for institutional managers to offer Bitcoin mutual funds, pension funds, 401(k)s, ETFs, and other financial instruments as highly regulated, mainstream investments.

  • A more convenient mechanism of using crypto assets to purchase goods and services


According to Kelly Loeffler, Bakkt CEO, Bakkt intends to create a robust infrastructure include "...consistent standards for compliance...market surveillance, and reporting standards at the federal regulation level." In its repeated postponements of rulings on proposed Bitcoin ETFs, SEC divisions have insisted that exchanges provide sufficient means to prevent fraudulent or manipulative acts and practices" or demonstrate "surveillance-sharing with a regulated market of 'significant size'". According to the SEC, this would require "...meaningful analysis of the futures markets based on 'reliable data about the Bitcoin spot market...'"


Although no details have been released on how Bakkt plans to do this, there is substantial corporate weight behind their creation. For example, ICE operates six leading regulated financial exchanged including the NYSE and the NY Board of Trade, ARCA (the world's largest marketplace for ETFs), ICE Futures US, and ICE Futures Europe. The NYSE alone is the largest stock exchange in the world, with assets totaling a market capitalization of 23 trillion (yes, with a "T"...that is not a typo) dollars. That value is currently 100x the total of the entire cryptocurrency market capitalization. As if the support of the owner of the NYSE is not enough, Microsoft is another corporate powerhouse backing the creation of Bakkt. Furthermore, one of the first companies to use the Bakkt processing platform for digital payments will be...Starbucks.


Kelly Loeffler, CEO of Bakkt, has alread stated that Bakkt "...will not be traded on margin, use leverage, or serve to create a paper claim on a real asset." which should satisfy regulatory interests related to reducing investor risk. Thus, "...buying one USD/BTC futures contract, for example, will result in daily delivery of one Bitcoin into the customer's account." Thus, all Bitcoin trades will absolutely require that Bakkt purchase the Bitcoin on behalf of the consumer or institutional investor first, significantly driving up the price of the digital asset.


Bakkt will partner with Starbucks, which has already announced that it intends "...to play a pivotal role in developing practical, trusted, and regulated applications for consumers to convert their digital assets into US dollars for use at Starbucks."


If approved by the CFTC, Bakkt has the ability to transform Bitcoin from a volatile, theft-prone curiosity to a reliable global currency and efficient mechanism of wealth transfer. Indeed, this would mark a remarkable transformation for a digital asset that has struggled in recent years to shed its highly speculative image.


SO WHEN WILL BAKKT OPEN FOR BUSINESS?


The time frame for the initial opening of Bakkt is scheduled to be in November. Knowing that Bakkt must purchase Bitcoins in order to be able to use for transactions and sale to clients, there will likely be an initial boost beginning in mid-October to the Bitcoin price as demand obviously increases. Once this bull run gets started, it is not inconceivable that we will see Bitcoin hit prices nearing last December's $20,000 per coin high. Marius Krames, a well known influencer or cryptocurrencies, predicts highs in December reaching stratospheric levels of $50,000 - $100,000, and indicates that an average multiple of 17x with maximum multiples of 40x are within the anticipated normal range.


It looks like those who have been lucky enough to heed Coins Demystified's advice of only investing what they can afford to lose, and have been able to hold through all of the turmoil will see their coins once again ride the crypto roller-coaster.


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