The Movement Into Cryptocurrencies

Summary

• It is amazing all the activity taking place in the areas of "new" technology as start-ups and early-stage companies rush to take advantage of all the money that is available.
• Recently I wrote about how innovators working in the area of electric cars are using SPAC financing to come to market; but this is happenin in the area of cryptocurrencies.
• This is risky investment as the companies coming to market don't have much of a record and the makeup of their markets in five- to ten-years is highly unknown.
• Yet, this is how the world is evolving right now and lots and lots of new ideas and new talent are coming to the market in an effort to play a big role in the future structure of the economy.

The future is rapidly getting here. New technology is driving much of what is happening and taking advantage of all the money that is currently floating around.

My recent post “The Movement Into Electric Cars” treats one segment of what is happening. The same thing appears to be happening in the area of cryptocurrencies.

To take one example, Bakkt Holdings, a cryptocurrency platform, is coming to market.

This is about a month after Coinbase, a “well-known” digital currency exchange, announced its intention to come to market with an IPO.

Furthermore, Bakkt’s effort is aimed at putting it in the same playing ground with other

“blockbuster financial apps like Robinhood, Venmo or Square Inc.’s Cash App.”

The Bakkt App has built a tool to let people “manage their holdings of various digital assets. These could include bitcoin, loyalty points and reward programs, like those offered by Starbuck Corp. and airlines, and virtual assets from videogames.”

The company says that more than 400,000 people have preregistered for the “public rollout” of the app in March 2021. Projections are for more than 30 million users in five years.

The chief executive officer of the company will be Gavin Michael, who has worked in banking technology for Citigroup and JPMorgan, Chase & Co. Not too bad for credentials.

Lots of things are happening in this space and investors need to have some idea of what is going on here.

Coming To Market

Similar to what I described in my earlier article about electric cars, Bakkt Holdings will be merged with a special purpose acquisition company, a SPAC. As described below, Bakkt will be eventually be listed on the NYSE.

This is proving to be a much smoother path to public listing than taking the company through an Initial Public Offering. Furthermore, it allows more “prominent” people to play a role in the effort, thereby generating more attention to the listing.

For example, in the area of electric cars, Bill Gates is participating with in the SPAC for QuantumScape, a battery company.

So, now to some of the other players working in the Bakkt space.

Intercontinental Exchange Inc (NYSE: ICE) is the parent of Bakkt. The company Bakkt will be merged with is titled VPC Impact Acquisition Holdings CI A (NASDAQ: VIH), a SPAC sponsored by Chicago-based investment group Victory Park Capital. The resulting company will switch from NASDAQ to the NYSE and is expected to have an enterprise value of around $2.0 billion.

Bakkt will have some $500 million of cash to begin its journey as a NYSE-listed company.

Note: ICE, an Atlanta-based company, is also the parent company of the New York Stock Exchange. The core businesses of ICE are exchanges and clearing-houses used by banks and large trading companies. Bakkt is the company’s first consumer-oriented business.

The Future

Check out the combination cited here. Bakkt works in the bitcoin space, among other things.

ICE has core businesses in exchanges, like the NYSE, and clearing-houses, both used by banks and large trading companies.

Seems like there is a real natural match here between the banking and financial sectors and the payments system. With the future plotted for Bakkt, one could see it becoming an important player in stock exchanges and clearing houses.

One of the most interesting connections here is the one with the new CEO of Bakkt, Gavin Michael. As is noted above, Mr. Michael was most recently the head of technology for Citigroup’s consumer bank. Previous to that he held a similar role at JPMorgan, Chase.

As I have written in earlier posts, Citigroup has been moving to become more aggressive in the area of the payments system and this is one reason why they hired Mr. Michael from JPMorgan.

JPMorgan, Chase is, I believe, the leader amongst the biggest banks in the U.S. in terms of advancing itself in the world of payment systems. I have written about this subject many times.

So, Mr. Michael has excellent credentials to work in this area and I really believe that making Bakkt a player in the world of payments system will be one of his major goals.

Being tied with the NYSE and other exchanges and with clearing-houses seems to provide many inroads into this part of the financial system, one that thrives through the payments system.

Going Forward

I am very intrigued with Bakkt and with all that Bakkt can do.

And, I am very impressed with the leadership Bakkt will have with Mr. Michael. I am also impressed the cash and financial resources that Bakkt begins with.

I am not saying that one should run out and invest in Bakkt. This is a very, very risky area as I discussed in my earlier article on electric cars. Cryptocurrencies have an intriguing aura about them, but it is still going to take five- to ten-years for the payments system to consolidate into it’s future structure. We have very little idea what that will exactly look like or who will be the ultimate survivors. Investment in this kind of an opportunity depends a lot on the narrative an investor is comfortable and the trust that investor has in the leaders of the various organizations working to build the new system.

So, there is a long way to go, but it is exciting to see how the private sector is moving to create the new financial system.

Enough said, bring on the future.