Bakkt, a crypto custody firm, is predicting a surge in institutional investor participation in the cryptocurrency trading market. This is largely due to the recent approval of Bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC). Bakkt made this prediction while announcing its quarterly results, which showed a remarkable 324% increase in crypto trading volume compared to the previous quarter. This surge was driven by robust client trading activity, indicating a growing demand environment with increased industry activity, higher coin prices, and elevated retail trading volume.
The existing crypto trading market has primarily catered to retail investors using a central limit order book trading structure. However, institutional investors looking to offer Bitcoin ETFs have found this structure inadequate for their large-scale requirements. Recognizing this need, Bakkt plans to develop BakktX, an electronic communication network (ECN) designed specifically for institutional crypto trading. BakktX aims to provide high performance, low latency, and cost-effective solutions.
BakktX will facilitate real-time execution of trades, leveraging Bakkt’s extensive network of liquidity relationships. It will also have a low fee structure, incentivizing trading volumes and meeting the demands of institutional investors. Bakkt believes that this enhanced trading technology will strengthen existing relationships and attract new clients who prioritize top-tier infrastructure providers.
In addition to launching BakktX, the company plans to expand its product offerings and solutions while focusing on broadening its client network, deepening existing relationships, and 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 allocate resources to areas of growth. 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.
It is worth noting that trading volume on major cryptocurrency exchanges experienced a significant decline 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 cryptocurrency exchanges like Binance experienced a surge in trading volumes between October 2023 and March 2024.
