Su Zhu, the CEO of Three Arrows Capital, has named five main reasons why Bakkt, a crypto subsidiary of ICE, lags behind other exchanges, such as BitMEX and Deribit.
Had lunch w the largest shareholder of ICE last week. He asked why Bakkt isn't gaining more market share vs Bitmex, Deribit, etc.
— Su Zhu (@zhusu) February 9, 2020
I said:
1) over-reliant on clearing brokers
2) can't margin in BTC
3) can't trade 24/7
4) can't trade infinitesimal sizes
5) 10x more expensive
Five reasons traders stay away from Bakkt
Bakkt has so far failed to come close to the unregulated derivatives market in terms of trading volumes despite being under the wing of the NYSE owner.
Zhu explained that reliance on clearing brokers and lack of margin trading in BTC dampened the enthusiasm of traders. The list of cons doesn't stop there — on top of being 10 times more expensive, Bakkt doesn't allow 24/7 trading. What's more, there is no way to trade minuscule amounts of BTC.
Still, Chicago-based CME Group seems to be doing just fine with its futures volumes exploding in 2020. However, its trading numbers still don't come close to BitMEX or Deribit.
Regulators clamp down on unregulated trading
US citizens are barred from trading on BitMEX, the biggest derivatives exchange that is based in Seychelles. However, these restrictions can be easily circumvented with the help of a VPN.
Back in July, the CFTC launched an investigation into the Arthur Hayes-helmed crypto juggernaut to determine whether or not it allowed Americans to trade on the exchange.
The FCA also moved to protect British traders from perilous derivatives trading.
Vladislav Sopov
Dan Burgin