For Bitcoin holders, ICE’s “Bakkt” a reason of concern: Wall Street veteran 20380
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Ashmita Dutta
Aug 6, 2018 at 1:37 PM

Intercontinental Exchange [ICE] has recently announced development of ‘Bakkt’ which Wall Street professional considers a concerning factor. The Wall Street veteran, Caitlin Long with previous experience at pension solutions of Morgan Stanley for 22 years has expressed her views on this issue. Long has stated that the development of ‘Bakkt plans’ by ICE, the operator of New York Stock Exchange would not only launch a brand new Bitcoin market but also beckon bad practices to the domain of cryptocurrency.

According to an article written by Long, she has compared and described this new initiative of ICE  as “double-edged sword.” In an interview with CCN, she stated, “In the good context, liquidity is improving because an asset’s investor base is growing—new investors are coming in, especially institutional investors.”   

Herein, she has classified two financialization types, one which brings positive impact on liquidity via institutional investors. The second equally results in the improvement of the financialization, however, it is conducted in an artificial manner.

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Long has commented, “In the negative context, it means liquidity is improving but it’s coming from the bad kind of leverage—paper claims to an asset that aren’t backed by the asset itself, or “circulation credit” as economist Ludwig von Mises calls it.”

She has further mentioned that the strongest ground for defending Bitcoin is its storage off the connectivity of the Internet. She has pointed out that this “will make it hard for Wall Street to source the actual bitcoins and consequently keep a practical lid on how much leverage-based financialization can happen to bitcoin.” 

During the interview, she has cited the instance of the Hong Kong based cryptocurrency exchange, OKEx stating, “Exhibit A is what happened with Hong Kong-based OKEx this week, where a large futures contract (worth more than $400 million) ended up with such a big loss that it threatened the exchange’s solvency because the loss consumed all of OKEx’s guarantee fund, so the exchange haircut its other customers’ gains in order to stay in business (a “bail-in”).

See also: A bearish Bitcoin's bullish market share: First-gen cryptocurrency sees 48% surge

The Wall Street professional has also shed light on the mechanism involved in the creation of credit in the securities market since 1980s. It is, indeed, anticipated that outcomes perhaps be unfavourable when ICE assumes a significant role in Bitcoin and other digital currencies’ financilaisation.

Statement by ICE CEO

Previously, Jeffrey Sprecher, the CEO of ICE has stated that he lacks understanding on cryptocurrency. Referring to this context, she has stated, “It was odd for the CEO to talk about bringing trust and transparency to Bitcoin, when Bitcoin doesn’t need either because it has already achieved both.”

In the interview she has also specified about “clearinghouses rehypothecate” providing client collateral a number of times. This, in turn, forms collateral chain with a considerable length wherein multiple parties claim owning “the very same, single asset.” In conclusion she has commented, “bitcoin holders have real reason to cheer ICE’s entry but also real reason to be concerned about it.” This statement, indeed, leaves a mark of scepticism regarding the impact of ICE’s launch of “Bakkt” plan in the crypto domain.

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