BAKKT buys half a billion in crypto deposit – Trustnodes

Bakkt, once the talk of the town when it launched at the end of the last bear in September 2019, and shortly after became a flop, is still standing to some extent, but at a loss.

$2 billion in losses by 2022, but $1.8 billion for “intangible asset impairment” which we take to mean crypto. Then about $100 million for the fourth quarter in actual losses.

So they restructure, lay people off, while welcoming a new team.

Apex Crypto has been acquired by Bakkt for $150 million with a bonus option of $40 million, and this little-known entity has around half a billion in crypto custody.

“Launch a crypto offering in under 45 days while preserving your brand identity,” says Apex Crypto.

We take it that you can copy and paste their code, put it on your website, and just like that, you’re now like Coinbase.

Bakkt claims Apex Crypto has around 5 million end users, but 30 customers. However, they have also seen a loss for their most recent filing, around $6 million for 2022.

Still, their volumes are somewhat impressive at $3 billion. Down from $9 billion in 2021, but there is clear demand for this Apex product.

For Bakkt, only 2 bitcoin-settled futures have changed hands for the April contract, that’s 2 bitcoins.

Offering these futures was the whole point of their business when it launched in 2019. Backed by ICE, the NYSE’s parent company which still holds a 66% stake in Bakkt, there was some hope at the time that these futures would offer an alternative to CMEs fiat bitcoin futures.

Unfortunately, the then new entrant clearly underestimated the competition from crypto-native entities, such as Kraken, just to mention another, and a key factor in this area as shown again by FTX: time in custody (literally for Sam Bankman-Fried) matters.

Bakkt just never answered why they should trust holding crypto as a newcomer when these other entities had offered the same thing while having the benefit of being tested over time.

So now, “our focus is on providing scalable B2B2C crypto and loyalty solutions that enable businesses to offer their customers unique experiences…we support the relationship our partners and customers have with their customers rather than compete on any way, whether it’s real or perceived,” Gavin Michael, Bakkt’s CEO, said in an earnings call last month.

They make a few million in revenue from it, $15 million for the 2nd quarter, but crypto loyalty programs are more what you think for dogecoin.

Hopes were much higher, but this can also work, although crypto processing tends to face the question of why not do it yourself?

For crypto payment processing, something like BitPay was seen as a bridge, an introduction to the brand new technology until merchants figure out how to copy and paste code. And loyalty programs are a niche of that.

However, the Apex angle, ignoring the regulatory aspects if we say we wanted to integrate it with Trustnodes, could be interesting because it’s a pretty hard thing to copy and paste and more importantly because it deals with end customer custody.

How reliable the service is that we would put ourselves and our potential customers at risk, and whether it does what we think it does based on your statements, is another matter.

But for market fit it can work. However, Bakkt is not quite what you think of when you look for that kind of solution – and when we started with earnings, we had actually forgotten what it was for.

This result is a first in crypto. Not what they would have wanted or we would have wanted, but it’s the first time a major debut has completely flopped.

But the name Bakkt is memorable and is in crypto – despite the long-forgotten flop – associated with positive feelings, if we speak for ourselves, because of all the anticipation at the time.

The brand is therefore probably still very valuable, and since most people have forgotten exactly what Bakkt was, a good business can be built out if they figure out exactly what a good market fit is.

That’s the tricky part, because the different nature of crypto means that the trust earned in traditional finance doesn’t necessarily carry over and is clearly not sufficient on its own.

We wouldn’t trust a commercial bank for example to hold our actual crypto, not in the first place anyway and not unless they offer full insurance at no extra cost, as we can just hold it in our own wallet or on an exchange.

As such, a name like Goldman Sachs or the NYSE doesn’t mean much in bitcoin in terms of custody, because they haven’t held bitcoin on a large scale, and so no one knows if they can be hacked.

Bakkt is therefore not the only traditional company that somehow has not been able to make an entrance in that area.

Because no matter what regulators say and all that, the market cares more about hackers or the Bankman-Fried type.

To prove that this is generalization, Apex is potentially different because they are a new player in a new area and therefore trust is secondary to choice.

Cryptonians, as risk-averse as they are, still remain very willing to take risks when it’s the limit or something like that.

All of this is taking nothing for granted in this space and certainly not your non-crypto brand, but Bakkt is standing by what could be the end of another bear for them, and so something may well come of it in the end.