Owner of the New York Stock Exchange - Intercontinental Exchange (NYSE: ICE) - recently announced plans to launch a new company, Bakkt, to federally regulate Bitcoin. But will Wall Street financing Bitcoin with leverage defeat the purpose of a decentralized currency?
CEO Kelly Loeffler introduced Bakkt as 'a company that will enable consumer and institutions to buy, sell, store and spend digital assets on a seamless global network.'
Bakkt is expected to launch in November 2018. The company aims to create an ecosystem for digital assets with the help of Microsoft, Starbucks, Boston Consulting Group, Fortress Investment Group, Eagle Seven and Susquehanna International Group.
Explore Bakkt, but keep cash
If Bitcoin makes it as a mainstream currency with Bakkt, card companies like Visa and Mastercard will likely be worried. A recent Fortune article even warned, 'The next step after that could be using Bitcoin to replace your credit card.'
This doesn't seem to threaten the existence of cash...as long as the 'cashless hype' doesn't get out of hand.
3 reasons why Bitcoin cannot replace cash
There is one thing that everyone knows about cryptocurrency... it is confusing!
As exciting as a new currency ecosystem is, it is crucial that the public is not manipulated into giving up the most simple-to-use payment form: cash. Whatever the age or tech-savvy of the parties involved in a transaction, cash is easy to use.
But on August 5th, one Twitter user expressed his confusion in a tweet quoted by Bitcoinist:
“If what I’m understanding about BAKKT is that I can buy BTC direct on my discount brokerage, alongside my stock portfolio, it makes the ETF completely redundant,”
Not even Starbucks is accepting Bitcoin, and they're on the Bakkt-wagon. Despite the various misleading headlines suggesting that Bakkt's venture will mean you can buy a frappuccino with Bitcoin, a Starbuck's spokesperson had to clarify in a Vice article, that they are a 'flagship retailer' but will not be accepting any cryptocurrency:
"It is important to clarify that we are not accepting digital assets at Starbucks. Rather, the exchange will convert digital assets like bitcoin into US dollars, which can be used at Starbucks,"
Aside from the cryptic nature of understanding cryptocurrency, Bitcoin's biggest critique is about its volatility.
Pending regulatory approval, ICE said it intends to start a bitcoin futures contract in November. Starbucks, which has a mobile payment service for its rewards members, is also participating. Bitcoin drifted lower following the announcement. Quartz
This year alone, the price of Bitcoin has fallen by 50%. Still, Bitcoin believers see each crash as an opportunity, but that may not always be the case. It should be a red flag that the announcement of Bakkt was followed by a slight decline in Bitcoin's price.
Jordan Belfort, the Wolf of Wall Street predicts that when Bitcoin collapses (not 'if'), how bad it will be in his own YouTube video:
“[Bitcoin] is all based on the Great Fools Theory....There’s no fundamental value [with bitcoin], it’s all based on the next guy and the next guy...Get out if you don’t want to lose all of your money because … there’s a very good chance it’s going to crack."
Every coin has two sides... even Bitcoin.
Forbes contributor, Caitlin Long unpacks the pros and cons of the ICE's ambitious Bitcoin plan.
Bakkt, a new ecosystem for cryptocurrencies, along with several partners. This is a major step in the mainstreaming of bitcoin and cryptocurrencies. But it’s also a double-edged sword because it’s likely the beginning of Wall Street creating financial claims to bitcoin out of thin air (and not backed by actual bitcoins), which could offset some of Bitcoin’s algorithmically-enforced scarcity. Perhaps that’s why bitcoin’s price declined slightly after today's announcement by ICE.
Bakkt is yet more evidence that incumbent institutions are increasingly taking the “join ‘em” approach to cryptocurrencies, as explored in Part 1 of my 3-part series about the building rivalry between cryptocurrencies and Wall Street. Bakkt could bring many positives to cryptocurrencies...
But ICE’s news also has downsides. As explored in Part 2 of the 3-part series just two days ago, Wall Street's only shot at controlling cryptocurrencies is to financialize them via leverage—by creating more financial claims to the coins than there are underlying coins and thereby influencing the underlying coin prices via derivatives markets. It’s pretty much impossible at this point for anyone to gain control of the Bitcoin network (and likely the other big cryptocurrency networks too), so Wall Street's only major avenue for controlling them is to financialize them via leverage....
"I think crypto-currency is junk....The idea of an anonymized currency produced by people who have to mine it, the value of which can fluctuate wildly - that to me is not the way that any medium of exchange deserves to be considered as a medium of exchange,"
But before cashless campaigners get too excited, observers should remember that Bitcoin transactions will continue to require electricity and internet connection. It's so obvious, it's taken for granted. Even a federally approved digital currency cannot compete with cash when it comes to reliability on a worldwide scale. Lights out.
Formed by Intercontinental Exchange’s proven financial market infrastructure and technology, Bakkt’s secure global platform will connect investors, merchants, and consumers, making it easier, faster and more cost-effective to access, trade and use digital assets. Bakkt’s open-source, neutral platform will be designed to meet applicable regulatory requirements and to support innovation around digital assets and blockchain applications.
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