Bakkt CEO Kelly Loeffler Claims We Need Better Price Discovery in the Crypto Industry
Price discovery is a crucial part of any market. A new blog post suggests we need better price formation in the crypto industry.
That blog post comes from Kelly Loeffler, CEO of Bakkt. Cryptocurreny exchange Bakkt came out of stealth two weeks ago with the goal of making digital assets mainstream. In her blog post, Loeffler discusses why effective price formation is crucial for the future of cryptocurrency.
Loeffler writes that good price discovery relies on physical delivery:
“A critical element to price discovery is physical delivery. Specifically, with our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded. As such, our new daily Bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset. This supports market integrity and differentiates our effort from existing futures and crypto exchanges which allow for margin, leverage and cash settlement.”
Loeffler also claims that Bakkt uses a secure, regulated warehouse solution to aid crypto price discovery. With each bitcoin on the exchange linked to real bitcoin, we can have effective price discovery in the crypto market. Investors aren’t trading leveraged products, nor are they trading bitcoins that they don’t really own.
Loeffler Believes Crypto Has a Bright Future
Cryptocurrency is in the middle of a prolonged bear market. Prices have been sliding steadily since January 2018, with bitcoin recently touching its all-time low for the year.
Despite the slide, Loeffler believes in the future of our favorite industry:
“Recently, the Wall Street Journal headlined that the aggregate market capitalization of digital assets slid below $200 billion, down 70% from the peak at the start of 2018. At the same time, there are numerous reports that venture investing, initial coin offerings, and corporate R&D related to blockchain and digital assets are all on track to surpass 2017 levels. With the potential for efficiency and innovation, the focus on new applications and infrastructure indicates a strong appetite for this market and technology.”
Bitcoin has gone through prolonged periods like the one we’re experiencing now. After the surge of attention in 2014, for example, bitcoin’s price retreated for a multi-year period. During this period, developers continued to improve the protocol and expand its usefulness. In 2017, the hard work paid off and sent bitcoin catapulting to a new all-time high close to $20,000. We appear to be in a similar “inter-boom” period right now.
What’s Next for Bakkt?
In her brief blog post, Loeffler also explained the next steps for her company, Bakkt.
Loeffler claims the company experienced a “very strong” response after announcing itself to the internet two weeks ago.
Loeffler also emphasizes how her exchange will use trusted infrastructure for storing, trading, and spending digital currencies. Key features of Bakkt’s framework, according to Loeffler, include:
- A consistent regulatory construct
- Transparent, efficient price discovery
- An institutional quality pre and post-trade infrastructure
You can read Bakkt CEO Kelly Loeffler’s full blog post here.