Bitcoin’s LN Developer Discloses the Network’s Vulnerability

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Bitcoin’s (BTC) Lightning Network (LN) developer Rusty Russel has published the full disclosure of the network’s vulnerability discovered in August, accompanied by a solution.

Russel pointed out that the vulnerability appeared while opening funding channels. The described process does not require that receivers check if a transaction is the one promised by the funder in terms of amounts and the actual scriptpubkey. 

Scriptpubkey is an output transaction script that requires specific conditions to be observed for a receiver to spend their Bitcoins. The file explains:

“A lightning node accepting a channel must check that the funding transaction output does indeed open the channel proposed. Otherwise an attacker can claim to open a channel but either not pay to the peer, or not pay the full amount. Once that transaction reaches the minimum depth, it can spend funds from the channel. The victim will only notice when it tries to close the channel and none of the commitment or mutual close transactions it has are valid.”

A possible solution

Russel also proposed a solution to the aforementioned problem. Once the funding transaction is seen, peers “must check that the outpoint as described in `funding_created`[1] is a funding transaction output[2] with the amount described in `open_channel`[3].”

The file also warns that c-lightning versions 0.7.1 and above perform the process correctly, urging users to upgrade the older versions of their Lightning Nodes.

On Sept. 10, Olaoluwa Osuntokun, CTO at LN-focused startups Lightning Labs and ACINQ, also claimed to have found instances of the vulnerability being exploited. In order to avoid the risk of losing funds, Osuntokun strongly advised users to update their LN versions. The affected versions included, per Osuntokun, LND nodes version 0.7 and below, c-lightning nodes version 0.7 and below, and eclair nodes version 0.3 and below, the post noted.

On Sept. 26, the number of Bitcoin’s LN nodes reached 10,000 for the first time. 

As Cointelegraph previously reported, Andreas Antonopoulos announced his new “Mastering Lightning Network” book, co-authored by René Pickhardt and Lightning Labs CTO Olaoluwa Osuntokun.





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Overstock’s Path From Dot-Com-Bubble Ruins to Blockchain Ecosystem

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On Sept. 19, former Overstock.com CEO Patrick Byrne sold his entire stake in the firm, which accounted for 13% of the company and was worth over $90 million. While the move surprised many, those closely following Patrick’s eccentric personality saw it coming from a mile away. 

Overstock was launched in May 1999. In the early days of the internet, it worked as an online marketplace that sold surplus goods from failed dot-com companies. It had a competitive advantage by selling at rates lower than wholesale prices. Its business model still hasn’t changed, selling closeout home decor, furniture, bedding and more.

Thanks to Byrne, Bitcoin was being accepted as a payment option on Overstock.com way back in 2014. In fact, it was the first major retail outlet to do so. Byrne’s love for Bitcoin was fueled by his disdain for Wall Street and mainstream finance. He did not even hold a traditional initial public offering (IPO) but rather raised money directly from investors via a Dutch IPO.

Overstock’s move to accept Bitcoin early on has made it a pioneer of crypto adoption. Igor Chugunov, CEO and founder of Credits Blockchain Platform, summed up how Overstock helped the mass market ease into the crypto world when he told Cointelegraph: 

“It creates an appropriate environment for the popularization of cryptocurrencies by introducing innovative fast payment systems that will simplify purchases and sales using cross-border transfers and serve as an incentive for the e-commerce industry and many others.”

Subscribing to the ideas of the Austrian school of economics, Byrne believes that the economy shouldn’t be in the hands of a central authority but rather the individuals. On these lines, he said:

“These institutions that we get told are neutral and are governing society neutrally […] become the tools of the powerful to oppress the weak.”

Bitcoin and Overstock

Through a partnership with Coinbase, Overstock started to accept Bitcoin in January 2014. Byrne claimed that this move saved the company five years of integrating it into its adoption cycle. Looking at the current trend of large institutions jumping on the bandwagon of accepting crypto payments, he seems to be right. 

The move was triggered by an interview in which he said that the company might start accepting Bitcoin. Even though it seemed to be an off-the-cuff comment, as the media jumped on this news, Byrne quickly got in touch with Coinbase to make it happen. 

Overstock.com accepting crypto early on kept the company and Byrne in the spotlight of the crypto world — and being a Wall Street critic bolstered his reputation within both the company and the community. Furthermore, the retailer’s long-term strategy of increasing corporate-wide use of Bitcoin combined with its philosophy toward education, incentives and motivation are seen as critical means to support the mass adoption of cryptocurrencies.

Back in August 2017, the firm announced it would keep half of its Bitcoin payments as an investment. However, the company’s association with crypto forced its share price to fall over 11% in January 2018, when the valuation of Bitcoin fell by over 50%. 

Still, Byrne is a blockchain-before-Bitcoin kind of guy. To demonstrate his trust in blockchain, he launched a venture capital firm within Overstock called Medici Ventures, intended to fund blockchain startups with Byrne’s personal finances. 

The biggest crypto subsidiary of Overstock.com is tZERO, which aims to remove brokers and compete with traditional stock exchanges. In August 2018, Hong Kong-based private equity firm GSR Capital invested $270 million in tZERO.

Overstock CEO sells his stock

Byrne’s recent move of selling Overstock shares is nothing new for him. Back in September 2018, he sold around $20 million of his stock in just two days. Even though he requested investors not panic in an open letter and assured them that he is “still in the game,” the company’s share price consequently fell by 12%.

The final sell-off should not have come as a surprise to his investors. Days prior to doing so, he had promised that he would “reinvest most of this money into two co-investments with Overstock and Medici Ventures.” Then, perhaps unsurprisingly, Medici made a $2 million investment on Sept. 26 into Salt Lake City-based Evernym, a startup that develops blockchain-based self-sovereign identity. Another reason he cited was to meet tax obligations, saying that he needed to “pay Uncle Sam his cut.”

Back then, Byrne was playing down his inclination for selling his stocks to invest in blockchain, saying that he has “only ever sold a tiny sliver” of his stake. But now, Byrne has placed all his bets on blockchain technology. 

Byrne resigned from Overstock on Aug. 22, but even then spoke about how blockchain will revolutionize the world and will “reshape key social institutions.” He also cited his controversial relationship with Maria Butina, a self-confessed foreign agent, as one of the primary reasons for his departure. 

On Sept. 19, he cashed out 4.8 million Overstock (OSTKO) shares worth 13% of the entire company. Filings from the United States Securities and Exchange Commission (SEC) reveal that he was selling his shares for increasingly lower prices, ranging from $21.84 to $16.32. OSTKO shares were hitting a 52-week high prior to Byrne’s selling spree, but saw a notable drop afterward and fell continuously after Sept. 12. 

Overstock share price in USD

It’s never a wise investment decision to over-allocate your portfolio into one or two assets. Byrne’s situation seems unique, however, and he therefore had to find a different solution that worked. When talking about Byrne doubling down on crypto, Michael Yuan, founder of decentralized marketplace OpenBay told Cointelegraph: 

“I’m not a financial advisor, but diversification is typically a better risk management strategy. That said, Byrne continued — and increasing — faith in crypto as a good, long-term investment certainly augurs well for other crypto investors to stay the course.”

Overstock continues to be blockchain-friendly

Byrne initially received a warm response from investors when Overstock.com announced the big push into blockchain, but its cryptocurrency-focused Medici Ventures subsidiary has been relatively slow to make headway. When Medici Ventures disclosed that it was part of an SEC investigation into cryptocurrency-related companies, Overstock shares fell.

When Byrne resigned, there were questions being asked about Overstock’s commitment to blockchain technology. His position as CEO was filled by Jonathan Johnson, while Kamelia Aryafar took his place as vice president and board member of Overstock Retail. Johnson was earlier acting as the company’s interim CEO but was formally inducted as CEO on Sept. 23.

Almost a month after Byrne’s resignation, Johnson announced that the company was planning on liberalizing its planned digital dividend share trading. According to Byrne, this was designed in an effort to minimize the influence of short-sellers and the company is working with the SEC to make its blockchain-based digital dividends freely tradable by nonaffiliates following distribution.

Shortly after, on Sept. 24, Overstock filed an S-3 form for the registration of its blockchain-based digital preferred stock with the SEC. Jonathan said that the filing represents the company’s first step in its registration of the OSTKO dividend. Shareholders will get a single unit of the Series A-1 preferred stock for every 10 common shares of the company. 

However, to acquire the asset, potential shareholders have to set up an account with Dinosaur Financial Group to access PRO Securities, the trading system developed by Overstock’s tZERO.





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Employee Fined For Mining BTC on Nuclear Research Center Supercomputer

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An employee at a nuclear research center in the closed town of Sarov in Russia was fined for illegally mining Bitcoin (BTC).

Convicted to pay $7,000 fine

According to a Sept. 27 article by Russian news outlet Meduza, a man was fined 450,000 rubles ($7,000) for trying to mine Bitcoin by using a petaflop-capable supercomputer at his workplace, the All-Russian Scientific Research Institute in Sarov, Russia.

Sarov, about 230 miles east of Moscow is a closed town as it is the Russian center for nuclear weapons research. 

The court delivered the verdict on Sept. 17. The nuclear research employee was convicted of unlawful access to computer information and a violation of the rules for storing information.

Using illegal electricity to mine crypto

As Cointelegraph recently reported, an Armenian IT company was accused of illegally accessing electricity and using it to mine cryptocurrencies. The Armenian National Security Service claimed that the IT company installed cryptocurrency mining equipment inside one of its hydropower plants and as a result illegally consumed 1.5 million kilowatt-hours of electricity — worth more than $150,000, locally — over the course of 1.5 years.

In May, Cointelegrap reported that the state authorities of China’s Sichuan province were investigating local Bitcoin mining farms that allegedly been built illegally. More than 30,000 Bitcoin mining machines were reportedly constructed without official approval from the local government and were subject to further examination.





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Binance Helps UK Police to Stop $51 Million Phishing Fraud

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Binance claims to have assisted British prosecutors in an investigation of an online fraud that resulted in over $51 million losses by victims.

Criminal is now jailed

On Sept. 26, Binance’s chief compliance officer Samuel Lim published a blog post saying that the exchange was working with the Cyber Crime Unit of the United Kingdom’s Metropolitan Police Service to investigate into Bulgarian phishing expert Svetoslav Donchev.

As officially reported by the Crown Prosecution Service (CPS), Donchev, 37, was extradited to the U.K. from Bulgaria to face the online scamming fraud charges and pleaded guilty to five offences to receive a nine-year sentence on Sept. 20.

Half a million potential victims

According to the CPS, the criminal created website scripts designed to look just like the real websites of up to 53 U.K.-based legitimate firms to help criminals steal 41.6 million British pounds ($51.3 million). By imitating legal firms, other criminals were able to use his scripts to obtain personal data about clients of those services, which was later reportedly sold on the dark web.

According to estimations, the fraud potentially targeted 500,000 victims.

Staying informed to protect against cybercrimes

In the post, Binance outlined its commitment to ensuring that its community remains secure. Binance further expressed gratitude to British authorities for cooperation in combating cybercrime: 

“We are thankful for the UK Metropolitan Police Service, as well as the many other agencies actively working with us, and other industry players, to continue our fight against cybercrime and sustain a healthy, legitimate market.”

Additionally, Lim offered Binance Academy’s Phishing Quiz for Binancians to try out, noting that the best way to protect against cyber criminals is to stay informed about potential security risks and good practices online.

In May 2019, Binance suffered a major hack that allowed hackers to steal 7,000 Bitcoin (BTC) worth around $40 million at the time of the hack. As reported by Binance, hackers deployed a range of tactics including phishing and viruses to obtain a big number of 2FA codes and API keys through the hack.





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Fake Royal Letter Asks $2.5M in BTC to Save UK’s Economy After Brexit

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Scammers asked British citizens for nearly $2.5 million in Bitcoin (BTC), claiming that the funds will be spent to maintain the local economy after Brexit.

Physical letters vs emails

Fraudsters apparently sent out physical letters to the British, posing as a private secretary of Queen Elizabeth II, according to one of the alleged copies revealed by an exec of a local tech firm.

Paul Ridden, CEO at United Kingdom-based IT firm Smarttask, posted a picture of the letter on Sept. 24 on LinkedIn, chuckling about the apparently failed phishing scam and asking if anyone else have received something similar to that.

Dated Sept. 16, the letter claims that this is the second time so far when the Queen appeals to a “certain number of people to save Great Britain’s economy.” The letter says that the Queen’s part has already accumulated 82% of the 19 billion British pounds that must be paid to the European Union to save the economy.

High rewards promises

The letter claims that the “Royal House” is looking to borrow between 450,000 to 2,000,000 British pounds (from $550,000 to $2.5 million) from British citizens, asking the recipients of the letter to send money via Bitcoin.

In exchange for participation, the letter claims to offer the potential Bitcoin donors a 30% interest rate for a period of three months as well as the opportunity to become a Member of the Royal Warrant Holders Association.

The letter sent to Paul Ridden

The letter sent to Paul Ridden

Following the news, British tech-focused publication IT Pro contacted Buckingham Palace, which did not reply to their comment request at press time. Ridden expressed confidence that nobody will send any Bitcoin to the fraudsters, calling the scam attempt poor due to the letter’s poor English, while also noting a reasonable level of financial awareness in Britain.





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China’s Fintech Stocks Soar Over 50% in 2019 Amid CBDC Anticipation

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China Securities Index Co. (CSI) Fintech Theme Index has risen over 50% in 2019, outperforming the broader market.

Some stocks skyrocketing 200%

According to a Reuters report on Sept. 26, stocks of China’s fintech firms have seen a notable surge this year amid investors’ anticipation of China’s launch of its own digital currency as well as the demand it would generate for security and payment services.

As such, the CSI fintech theme index — which is composed of A-Share stocks relating to fintech, including payment and settlement, capital raising, wealth management and retail banking — has gained more than 50% so far in 2019, the report notes. Another major stock, Beijing Certificate Authority, which is focused on electronic authentication services, seen a record high this month after soaring almost 200% in 2019, according to Reuters.

No CBDC in the near future, PBoC says

Meanwhile, the People’s Bank of China (PBoC) recently denied rumors that it would launch its own digital currency in the near term as the bank reportedly claimed that it has no timetable to launch as of Sept. 24. The plans were first reported in late August 2019, when a local media outlet wrote that the PBoC was almost ready to launch its government-backed digital currency in the wake of Facebook’s introduction of Libra white paper in June.

According to a report from China-based publication the Business Times, some financial analysts were expecting that the country would launch its much-anticipated cryptocurrency on Nov. 11, which coincides with the country’s Single’s Day, one of the busiest electronic shopping events of the year.





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South Korean Exchange Upbit Ends Orderbook Partnership With Bittrex

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South Korean cryptocurrency exchange Upbit has broken its partnership with Bittrex in a reorganization of its Bitcoin (BTC), Ether (ETH) and Tether (USDT) markets, local South Korean news outlet Decenter reported on Sept. 25. 

Previously it had a shared order book arrangement, with Bittrex orders being visible in the Upbit bid windows.

Upcoming reorganization of markets

In a notice to customers, Upbit announced its intention to introduce changes into its BTC, ETH and USDT markets. These changes include the introduction of market orders, limit orders, and stop-limit features, although no further details of this are given.

The notice did, however, include particular mention of the order book sharing with Bittrex being discontinued. This was later edited to remove specific reference to Bittrex.

Bittrex edited out of notice

The original wording, under the heading, “Discontinued order book sharing with Bittrex,” was as follows:

“As a result [of the changes], you will no longer be able to see orders placed at Bittrex in the Upbit BTC, ETH and USDT markets.”

However, the updated notice has the heading, “Only Upbit member’s orders are displayed on the order book,” and reads, “After changes are applied, only orders place by Upbit users are displayed on BTC, ETH and USDT markets.”

Upbit recently emerged as one of the leading exchanges in the latest Blockchain Transparency Institute report. It has also delisted privacy coins over concerns about money-laundering.





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Stablecoins and Crypto Not Suitable Money Substitutes

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Mario Draghi, president of the European Central Bank (ECB) shares his views on stablecoins, the future of crypto assets, and possible digital form of the Euro.

Monitoring developments in crypto

On Sept. 27, in a letter addressed to European parliament member Eva Kaili, ECB president Mario Draghi noted that the European System of Central Banks (ESCB) is closely monitoring developments in the cryptocurrency industry. Draghi added:

“The ESCB is analysing crypto-assets and stablecoins with a view to understanding their potential implications for monetary policy, the safety and efficiency of payments and market infrastructures, and the stability of the financial system.”

Despite displaying a positive approach towards new technologies, Draghi apparently thinks that stablecoins and cryptocurrency in general are of little value. He said:

“Thus far, stablecoins and crypto-assets have had limited implications in these areas and are not designed in ways that make them suitable substitutes for money.”

Draghi did add that due to the continuous technological innovation and rapid evolution in the cryptocurrency industry, the ECB’s assessment might be different in the future.

Digital Eurocoin looms?

Draghi also addressed the opportunities and challenges that come with releasing a digital form of the Euro coin. He pointed out that the technological part of a European stablecoin is not the issue, but “rather its utility in terms of costs and benefits to the public.” 

Draghi concluded his letter by pointing to Target Instant Payment Settlement service for the Eurozone, which was launched in November 2018, adding:

“It enables payment service providers to offer fund transfers to their customers in real time and around the clock, every day of the year.”

Cointelegraph reported on Sept. 24 that French Finance Minister Bruno Le Maire suggested that Europe should launch its own digital currency. Le Maire said that he would discuss the feasibility of a European public digital currency with his counterparts.





Source Cointelegraph

People Will Choose A Currency That Government Can’t Control: Pompliano

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The future will not bring competition between digital and non-digital currencies, but between monetary policies, according to Anthony Pompliano.

Pompliano made his comments on CNBC’s Squawk Box, Sept. 27. Ultimately, he believes, people will choose Bitcoin, as a currency that governments can’t control.

The U.S. government should tokenize the dollar immediately

Pompliano was being questioned on how Bitcoin can remain a store of value once the dollar and other currencies have become digital.

Firstly, he said that if he were the US government, he would tokenize the dollar immediately, noting that China is creating a digital Yuan and other countries would follow suit. All money would eventually be digital, he said, and the competition will be between different monetary policies.

However, if the digital Yuan becomes available but a digital dollar is not, then countries will find it easier to buy the Yuan, threatening the dollar’s position as the global reserve currency.

So why would people own Bitcoin if they can own a digital dollar?

When pressed on the original question, Pompliano said that he ultimately believed that people would opt for something that is not manipulatable, nor seizable, nor censorable.

The movement may be slow at first, he said, but people will ultimately choose a currency that the government can’t control.

Morgan Creek Digital co-founder, Pompliano, is a huge advocate of Bitcoin, recently suggesting that its pseudonymous inventor, Satoshi Nakamoto, should win the Nobel Peace Prize for its creation.





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Slow Start Unlikely to Dampen Long-Term Prospects

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After more than a year spent ensuring full compliance with the United States authorities, Bakkt, the first federally regulated platform for Bitcoin (BTC) futures trading, launched on September 23. 

Conceived by the global trading giant Intercontinental Exchange (ICE) and counting a solid portfolio of investors from Microsoft’s venture fund M12 to Starbucks as its backers, Bakkt offers institutional traders something brand new. The platform’s value proposition is physically-settled BTC futures contracts, combined with a sound custodial service approved by the Commodity Futures Trading Commission (CFTC).

Assuming that it is digital assets’ volatility and lack of regulatory safeguards that deters otherwise highly interested institutional investors from going big on BTC, Bakkt’s debut is a major milestone on the timeline of crypto adoption – and many in the space anticipated its debut with great excitement. However, as the first week of operation is coming to a close, the trading volumes on the platform remain meager. 

Worse luck, Bakkt’s launch coincided with an immense slump in Bitcoin’s market price, leading some analysts to suspect a causal connection between the two. Does the underwhelming kickoff signify an early end to Bakkt’s aspirations of becoming a gateway for widespread, institutional adoption of crypto?

Bitcoin meets regulation in Bakkt futures

The Intercontinental Exchange is a U.S. enterprise headquartered in Atlanta that operates a dozen major regulated exchanges and marketplaces around the world, including the New York Stock Exchange (NYSE) and ICE Futures Europe. In August 2018, ICE announced its plans to create a Bitcoin futures marketplace fully compliant with CFTC regulations, looking to launch it at the end of that year.

Unlike the Chicago Mercantile Exchange (CME) Bitcoin futures contracts that have been on the market since December 2017, the idea behind Bakkt is to create an instrument that would settle in actual Bitcoin upon liquidation. Whereas the value of a CME contract is delivered in cash equivalent and matched to the spot-market-based BTC price index at the time of expiration, owners of Bakkt futures get “physical” Bitcoin sent to their custodial account.

Related: What Does Mass Adoption Mean Relating to Crypto? Experts Answer

This modification could be seen as a step toward enhancing investors’ confidence in the new asset class. Presumably, as traders come to feel more serious about Bitcoin and its potential, they would prefer exposure to the actual coin rather than engaging with an instrument whose connection to the underlying asset is purely nominal. 

Winning this edge over the competition, though, invoked the need for an additional operational layer: reliable custody. It would be too long of a shot to expect that conservative institutional investors would line up to buy a nebulous asset that they didn’t know how to handle safely.

This approach was bound to create additional red tape for its proponents, as it required going the extra mile to clear regulators’ rigorous requirements for entities that seek to operate as crypto custodians. Negotiations with the CFTC centered on the custodial issue stalled and dragged for several more months than ICE had initially planned. 

It wasn’t until June 2019 that Bakkt secured the CFTC’s approval. Finally, on August 13, Bakkt Trust Co., the platform’s clearinghouse, obtained a charter from the New York State Department of Financial Services to operate as a custodian, marking the end of the platform’s regulatory quest.

On the day of its launch, Bakkt offered traders two types of derivatives: daily contracts, whose buyers receive their Bitcoin at the end of the same day — almost as if trading on a spot exchange — and monthly contracts, which ICE management hopes to be instrumental in longer-term BTC price discovery.

Unimpressive debut

Amid overall high expectations further fueled by crypto Twitter and media hype, Bakkt failed to impress on the first day of trading, with a paltry 71 contracts sold and the volume picking up slowly in the following days. To make matters worse, the day after launch, Bitcoin price took its largest intraday hit since January, losing some 13% within Tuesday. 

Bitcoin price declines by 13% in one day

Bitcoin price declines by 13% in one day. Source: Coin360.com

Some observers were quick to suggest that Bakkt’s slow showing was to blame. Mati Greenspan, senior market analyst at digital asset trading platform eToro, told Barron’s: “The catalyst for today’s plunge, in my mind, seems to be the underwhelming launch of Bakkt. This is a prime example of “buy the rumor, sell the news.”

Others pointed out the glaring difference between Bakkt’s 71 first-day deals and CME’s 5298 trades in the first 24 hours. There was also something ominously similar between the two premieres: the day after CME futures became available, Bitcoin price took a tumble from around $19,000 to below $17,000.

Related: Bitcoin Price Fear & Greed Index Turns Blood Red Under 8K — Time to Buy?

In the big picture, skeptics may be tempted to conclude that such a lackluster performance of a much-anticipated regulated platform indicates the real level of interest that institutional investors have for crypto assets, and that the drop was induced after market participants suddenly realized the big money is not coming all at once.

Bigger picture

It is quite possible that the situation is less unequivocal, however. For one, the comparison between Bakkt’s debut and that of CME’s futures is not really appropriate. Derivatives offered by the Chicago exchange hit the markets at the very peak of the December 2017 crypto craze, following a months-long race of price inflation. 

Bakkt opened business within a much more sober and stable market. Furthermore, it is not just the overall crypto market, but the crypto futures market that has dramatically transformed, having become much tighter. Alex Lam, CEO and co-founder of digital asset services platform RockX, shared his observation with Cointelegraph:

“While its launch was a highly anticipated milestone for both Bakkt and the wider crypto community, its lacklustre reception attests to the highly competitive market and the current barriers to mass entry.”

A popular demand for BTC derivatives trading is well-served by a number of unregulated platforms, which still host the bulk of the volume. Marketplaces such as BitMEX and OKEx enjoy high liquidity and offer traders leverage of up to 100:1. Christophe de Courson, CEO of blockchain asset management fund Olymp Capital, told Cointelegraph:

“Since the launch of Bakkt Bitcoin futures, the intraday volume has stayed between 70 to 100 BTC which, indeed, is small when compared to BitMEX, an unregulated exchange, with more than 270,000 BTC intraday volume on September 23rd 2019. However, it is noteworthy that regulated platforms generally have a smoother launch in comparison with crypto native platforms.”

Most of the experts who have spoken to Cointelegraph on this matter agree that, given this retail-driven character of crypto trading, it is unlikely that institution-oriented ventures like Bakkt will be exerting significant influence on the overall BTC market in the near future. Fran Strajnar, Founder and CEO of cryptocurrency research firm Brave New Coin, said:

“Bitcoin and crypto trading remains a retail-led phenomenon. Accessible products available on platforms like Bitmex, and spot exchanges like Binance, are likely to continue to drive volume in the near term.”

The recent price drop could be partly driven by the reaction to Bakkt’s initial performance, but the effect should not persist for too long if it is indeed the key driver behind the observed movement.

Other developments of the week could have also contributed to plummeting prices, most notably, the inexplicable drop in BTC network’s hash rate soon after the start of futures trading. The incident still leaves many questions unanswered, as the popular explanation — that Kyrgyzstan suddenly cut off electricity to dozens of crypto mining entities at once — doesn’t seem to be compelling.

Curbing expectations

Even if Bakkt’s “physical” delivery is indeed a major competitive advantage that should entice investors at higher rates compared to cash settlement, it is barely enough to override institutional inertia that underlies traditional asset managers and funds’ reluctance to rush to the gate immediately. Tom Maxon, Head of U.S. Operations at the blockchain security company CoolBitX, said:

“When it comes to institutional investors, Bakkt’s move will probably not make much of an impact to the price of Bitcoin at first. This is because Bakkt’s product faces two major obstacles: one, Bitcoin is still too unpredictable for institutional investors, and two, institutional funds’ board of directors will continue to perceive Bitcoin as a risky asset and fund managers will face an uphill battle to include this asset within their portfolio due to fiduciary duty. […] If conservative institutions have taken this long to invest in legal cannabis, they’re certainly going to take a long time to tolerate Bitcoin.”

Attracting big money to Bakkt’s new playground will likely be an incremental process, as many of the experts who have spoken to Cointelegraph on the matter admit. Jonathan Speigner, Founder and CEO of the crypto wallet company Coin.Space, noted to Cointelegraph:

“The main reason the volume is low is they just do not have the customer base yet, it will more than likely take several more months before they see broader institutional customers using the platform. Remember institutional money has always been skeptical of Bitcoin.”

Brave New Coin’s Fran Strajnar was also willing to give Bakkt more time to prove its worth as Bakkt is likely to evolve into a gateway that will capture today’s suppressed demand for crypto trading vehicles within the institutional investment space. Strajnar added that, “This demand will take time to materialize. It’s too early to conclude that Bakkt is a failed product based on tepid demand in its first few days of trading.”

Most industry experts were also willing to commend Bakkt for bringing a unique product to the market, which, in Tom Maxon’s words, is a “bold step towards the future of Bitcoin products.” Bill Shihara, CEO of cryptocurrency trading platform Bittrex, said in a statement for Cointelegraph:

“Bakkt’s regulated futures market is an exciting moment that marks how far the blockchain industry has come. These types of markets take time to build and reach to institutional traders, so a few days of trading isn’t representative of long term potential or performance. As an industry, this is a step in the right direction.”

Meanwhile, the busy market that Bakkt has just entered is poised to get even busier: CME has recently announced plans to supplement its futures contracts with options in early 2020, while up-and-coming competitors LedgerX and ErisX are getting closer to securing regulatory approval for launching their own physically delivered futures products. Along with the overall dynamics of investor interest for regulated crypto derivatives, we will soon have a chance to learn how different players in this field stack up against one another.





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