CEO of ICE, Parent of NYSE, Calls Bakkt ‘A Bit of a Moonshot Bet’

On Thursday (February 7th), during the Intercontinental Exchange (ICE) Q4 2018 Earnings Conference Call, Jeffrey C. Sprecher, the Founder, Chairman, and CEO of the ICE, the parent of the New York Stock Exchange (NYSE), referred to FinTech startup Bakkt, of which ICE is a majority stakeholder, as "a bit of a moonshot."

ICE,"a leading operator of global exchanges, clearing houses, data and listings services", announced Bakkt, "a Global Platform and Ecosystem for Digital Assets", on 3 August 2018. ICE said at the time that Bakkt's "first use cases will be for trading and conversion of Bitcoin versus fiat currencies," and that one of Bakkt's first offerings would be "a 1-day physically delivered Bitcoin contract" that it expected to launch in November 2018. Unfortunately, the launch did not go ahead as planned, it then got postponed to 24 January 2019, it still has not happened, and it is not clear when exactly it will happen.

During Thursday's earnings call, among the company participants, the first to speak was Warren Gardiner, Vice President of Investor Relations, who talked about how much money ICE expected to spend on getting Bakkt ready for launch:

"And finally, our investment in Bakkt will generate $20 million to $25 million of expense based upon the run rate in the first quarter. We will update you on progress at Bakkt and the level of investment as we move through the year."

Then, during the Q&A session, Mike Carrier, a managing director at Bank of America Merrill Lynch, asked Scott Hill, ICE's Chief Financial Officer (CFO), the following question about Bakkt:

"Thanks, good morning. Scott just on the on some of the guidance on the expenses just in terms of - like some of the buckets that you gave just anywhere like $30 million, $35 million on tech investment for new growth and then the $20 million, $25 million on Bakkt just wanted to get your sense on like what are those maybe initiatives? What are the expected returns or like revenue growth associated with some of those expenses whether it's a 2019 or further out?"

The ICE CFO said that "Bakkt is really an investment" and then handed over the question to the ICE CEO Sprecher, who had this to say about Bakkt (whose CEO happens to be Sprecher's wife, KellyLoeffler):

"Yes. Bakkt is a unique structure for us and that we've actually set it up as a separate company with a separate name, its own management team and separate capitalization. So right now ICE is the majority investor in the company, I expect that we'll do other rounds of financing. We'll make a decision as it goes forward whether we stay majority or allow it to spin three of us.

We believe that what ICE has if you step back and look at us is, we have obviously trading clearing. We have settlement capabilities, warehouse and custody management capabilities, large treasury operations, banking connectivity and a global infrastructure that is in many, many jurisdictions -- regulatory distinctions around the world with a massive cyber overlay.

That infrastructure has attracted a lot of very, very interesting companies that have come -- some that have invested in Bakkt, some are just working with Bakkt to try to tap into that infrastructure for some new use cases that will involve blockchain and digital assets and other things that we can provide these people. Obviously, we've announced the Starbucks -- our work with Starbucks and Microsoft. We have very, very large retail franchises global connectivity to end users that we hope will be brought into that ecosystem and could create a very, very valuable company out of that initiative if our business plan plays out.

So it's a bit of a moonshot bet and it's been organized in a manner that is very different than the way ICE typically does businesses. Bakkt has its own offices, its own management team and et cetera. And then we've entered into agreements with it to provide services, as I've described over that Bakkt -- over that ICE overlay.

So we'll see how it goes. They're well along in building out an infrastructure that I think you'll see launch later this year. And I'll let Bakkt talk more about how it wants to go about an what the business and use cases are its revenue model, et cetera, as it unfolds."

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Crypto Market-Maker Altonomy Receives $7 Million in Funding from Polychain Capital

Altonomy, a New York-based cryptoasset trading, advisory, and asset management company, has completed a $7 million fundraising round from Polychain Capital, a leading hedge fund and venture capital firm.

Co-founded by Ricky Li, a former Manager of Research and Product at the CME Group, Altonomy has also received funding from 7 Blocks.

Additional Capital Will Allow Altonomy to Have More Inventory

Commenting on how the additional capital could help Altonomy’s business operations, Li said: 

As a liquidity provider for altcoins, more funding will allow us to have more inventory, taking larger exposure and managing risk more effectively.

Li added that the extra funding would allow Altonomy’s trading desk to provide better services - as the platform would not need to “put constraints” on customers at settlement.

Funds May Be Used to “Source Liquidity for Customers”

Olaf Carlson-Wee, the Founder and CEO at Polychain Capital, remarked:

As a long-time user of Altonomy’s trading services, it was an easy decision for us to invest in their business when the opportunity became available.

Carlson-Wee, a former Product Manager and Head of Risk at Coinbase, also mentioned that the additional funding would help “source liquidity for customers, regardless of token type, order size, market cap, or whether the asset trades on centralized or decentralized exchanges.”

According to Coindesk, Li had suggested to investors in January 2019 that they “liquidate enough ETH so they would have at least two years of runway.” However, Li is now anticipating that cryptocurrency prices may continue to recover - after enduring a long bear market that lasted throughout 2018.

Altonomy Introduces Cloud Service for Crypto Mining

In addition to providing crypto trading and asset management services, Altonomy introduced a new product last year, called the AltMiner. According to Li, AltMiner’s cloud service allows Altonomy’s bigger investors to mine various cryptocurrencies.

Altonomy’s management claims that the AltMiner has a “superior return profile” with the “newest generation of miners, low electricity costs and a secure hosting site.”

During an interview with CryptoGlobe in May 2019, Lee explained how Altonomy’s crypto trading services were developed and their potential benefits.

One of Altonomy’s main services, called electronic execution, allows mining firms, investment companies and crypto exchanges to “enter and exit positions as an outsourced execution desk.”

As a high-frequency market-maker, Altonomy also provides liquidity for various tokens to several crypto spot and derivatives trading platforms.