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Institutional investors will drive growth in cryptocurrency trading
Institutional investors will play a bigger role in the cryptocurrency trading market, Bakkt it said Wednesday (May 15) when announcing its latest quarterly results.
Bakkt, which provides custody, trading and onramp capabilities for the cryptocurrency economy, said in a presentation released on Wednesday that this surge in mainstream adoption of cryptocurrencies was sparked by Securities and Exchange Commission(SEC) approval of bitcoin exchange traded funds (ETF).
During the quarter ended March 31, cryptocurrency trading volume increased 324% compared to the previous quarter, “driven by exceptionally strong customer trading activity,” the presentation reads.
“As evidenced by our trading volumes in the first quarter, we have started to see positive signs in the market and an improvement in the overall demand environment, with increased industry activity, higher coin prices and overall higher retail trading volume high.” Andy Mainpresident and CEO of Bakkt, said during the company’s quarterly earnings call Wednesday.
According to the presentation, institutional investors in this market are looking for a purpose-built cryptocurrency trading platform that will align with their needs and priorities, as opposed to the existing trading market that has been built primarily for retail investors.
“The cryptocurrency trading industry was created primarily for everyday retail investors using a central limit order book trading structure,” Main said on the call. “Meanwhile, institutional investors offering bitcoin ETFs are increasingly finding that the core retail limit order structure does not meet their needs at scale.”
Bakkt aims to capitalize on the opportunity this presents by developing a “foreign currency-style” electronic communications network (ECN) called BakktX that will be designed as a cryptocurrency 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 intended to drive trading volumes, according to the presentation.
“We believe this improvement in trading technology will strengthen our existing relationships and open doors to new customers who demand the most from their infrastructure providers,” Main said on the call.
In addition to expanding its products and solutions with BakktX, Bakkt aims to focus on expanding its customer network, deepening existing relationships and continuously improving 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 this will result in cash savings of $7 million in 2024 and annualized cash savings of $13 million, according to the presentation.
“While challenging, these decisions are crucial as we move toward profitability and reallocate our strategic investments toward growth areas,” Main said on the call.
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