PYMNTS MonitorEdge May 2024

Bakkt: Institutional Investors to Drive Growth in Crypto Trading Market

Institutional investors are going to play a bigger role in the cryptocurrency trading market, Bakkt said Wednesday (May 15) when announcing its latest quarterly results.

Bakkt, which provides custody, trading and onramp capabilities for the crypto economy, said in a presentation released Wednesday that this increase in the mainstream adoption of crypto was sparked by the Securities and Exchange Commission’s (SEC) approval of bitcoin exchange-traded funds (ETFs).

During the quarter ending March 31, crypto trading volume increased 324% compared to the previous quarter, “driven by exceptionally strong client trading activity,” the presentation said.

“As evidenced in our trading volumes in Q1, we’ve begun to see positive green shoots in the market and the overall demand environment improving, with more industry activity, higher coin prices and overall higher retail trading volume,” Andy Main, president and CEO of Bakkt, said Wednesday during the company’s quarterly earnings call.

The institutional investors in this market are looking for a purpose-built crypto trading platform that will align with their needs and priorities, as opposed to the existing trading market that was built primarily for retail investors, according to the presentation.

“The crypto trading industry has been built primarily for everyday retail investors who use a central limit order book trading structure,” Main said during the call. “Meanwhile, institutional investors who are offering bitcoin ETFs are increasingly finding that the retail central limit order book structure is not meeting their large-scale needs.”

Bakkt aims to take advantage of the opportunity this presents by developing a “foreign exchange-style” electronic communication network (ECN) called BakktX that will be designed as a crypto trading venue for institutions and will provide high performance, low latency and low cost, the presentation said.

The BakktX trading venue will execute trades in real time, leverage Bakkt’s network of liquidity relationships and have a low fee structure meant to incentivize trading volumes, per the presentation.

“We believe this improvement in trading technology will harden our existing relationships and open the door to new clients that demand the most from their infrastructure providers,” Main said during the call.

Together with expanding its products and solutions with BakktX, Bakkt aims to focus on broadening its client network, deepening its existing relationships and continuing to improve its cost structure throughout 2024, the company said in the presentation.

On May 2, Bakkt reduced its headcount by 20% as part of a restructuring initiative that will result in $7 million cash savings in 2024 and $13 million annualized cash savings, per the presentation.

“Although challenging, these decisions are crucial as we navigate towards profitability and to reallocate our strategic investments to growth areas,” Main said during the call.