Digital Asset Capital Allocation
Institutional Infrastructure Almost Fully in Place
The market price of Bitcoin may be weak but the news flow on the digital assets sector is incredibly strong.
Intercontinental Exchange which owns the New York Stock Exchange announced it is forming a new company called Bakkt. (https://www.bakkt.com/index)
The new venture which will launch in Q4 will offer a federally regulated market for Bitcoin.
Key features will include:
- ICE Futures U.S. will offer physically delivered futures contracts traded in BTC/USD (subject to regulatory approval).
- The contracts will be traded on ICE’s electronic trading platform.
- All trades to be cleared and guaranteed by ICE Clearing US, the central counterparty for all ICE cleared forex futures trades.
- Trades will result in physically delivered Bitcoin in ICE’s regulated Digital Asset Warehouse.
This is another major step forward in implementation of the key market infrastructure to facilitate institutional and retail capital into Bitcoin and other digital assets.
Their backers include:
- Fortress Group: which is where Bitcoin evangelist Mike Novogratz comes from, and Galaxy Digital (which is where he currently is)
- Trading firm Susquehanna which has had a committed trading desk to Bitcoin and cryptcurrencies for some time.
This will have enormous implications for digital assets as it will drive actual buying of physical Bitcoin in the spot market.
This is different to Bitcoin futures which trade in the market currently which are cash settled.
Pension Fund Allocation to Digital Assets
There is no question that millennials will think quite differently about portfolio allocation compared to other generations with digital assets becoming a core portfolio asset of the future.
In our report Blockchains & Digital Currency Wars which we published in May 2017, we explained how it may actually be the assets of Baby Boomers which provide a major tipping point for pension fund allocation to digital assets.
Baby Boomers are the elephant in the room when it comes to portfolio allocation and if they look to digital assets for portfolio returns then the quantum of capital that will flow could be simply enormous.
The reasons why this could happen include:
- unfunded pension funds
- required minimum distributions, and
- approximately $14 trillion of US retirement assets
Anything that facilitates pension fund allocation to digital assets is potentially huge news for this new asset class.
Bakkt is a huge step in that direction.