Bakkt Anticipates Surge in Institutional Investor Participation in Crypto Trading Market
Ruholamin Haqshanas
Last updated:
May 16, 2024 05:49 EDT
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2 min read
Bakkt, a crypto custody firm, is predicting a substantial increase in the involvement of institutional investors in the cryptocurrency trading market. According to Bakkt, the recent approval of Bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC) is the driving force behind this mainstream adoption. The firm made this prediction during the announcement of its latest quarterly results, as reported by PYMNTS.
Bakkt has observed a remarkable 324% surge in crypto trading volume in the first quarter, ending on March 31, compared to the previous quarter. This surge was primarily driven by robust client trading activity. Andy Main, President and CEO of Bakkt, stated during the company’s quarterly earnings call that this positive trend indicates a growing demand environment, with increased industry activity, higher coin prices, and overall elevated retail trading volume.
The existing crypto trading market was mainly designed for retail investors, utilizing a central limit order book trading structure. However, institutional investors aiming to offer Bitcoin ETFs have found that this structure does not meet their large-scale requirements. Recognizing this need, Bakkt plans to capitalize on the opportunity by developing BakktX, an electronic communication network (ECN) specifically designed as a crypto trading venue for institutions. BakktX aims to provide high performance, low latency, and cost-effective solutions.
The proposed BakktX trading venue will enable real-time execution of trades, leveraging Bakkt’s extensive network of liquidity relationships. It will also feature a low fee structure to incentivize trading volumes and cater to the demands of institutional investors. Bakkt believes that this enhancement in trading technology will strengthen existing relationships and attract new clients who prioritize top-tier infrastructure providers.
In addition to the launch of BakktX, the company plans to expand its product offerings and solutions while focusing on broadening its client network, deepening existing relationships, and continuously improving its cost structure throughout 2024. To streamline operations and drive profitability, Bakkt recently implemented a restructuring initiative, reducing its headcount by 20%. This strategic move is expected to result in $7 million in cash savings for 2024 and $13 million in annualized cash savings.
Bakkt’s decisions reflect its determination to navigate the challenging landscape and reallocate resources to growth areas. By capitalizing on the increasing interest of institutional investors and delivering a purpose-built trading platform, Bakkt aims to solidify its position as a key player in the evolving crypto trading market.
As reported, major cryptocurrency exchanges experienced a significant decline in trading volume in April, coinciding with Bitcoin’s retreat from its all-time high. Additionally, derivatives trading volume saw its first decrease in seven months, falling by 26.1% to $4.57 trillion. This decline occurred as major CEXs like Binance saw a large surge in trading volumes between October 2023 and March 2024.
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