With the momentous rise of cryptocurrency in recent years, demand for digital assets has only multiplied higher. For Bakkt (NYSE:BKKT), this allowed the company to gain legitimacy as a player in the digital currency space. Bakkt’s CEO, Gavin Michael, is a major proponent in the belief that crypto will only continue to flourish. “Crypto has proven that it’s here to stay,” Michael told InvestorPlace in an exclusive interview.
In fact, crypto seems to gain relevance with each passing day. During Super Bowl LVI, one of the highest-profile advertising opportunities of the year, crypto commercials dominated. Super Bowl LVI winner Odell Beckham Jr. even elected to receive his salary in Bitcoin (BTC-USD) last November. Before that, Saquon Barkley of the New York Giants announced that he would take all future endorsements in Bitcoin.
It isn’t just athletes who are getting involved with digital currencies, either. In 2021, venture capital firms invested more money into crypto-related ventures than in all previous years combined.
This sets the stage for Bakkt to enter a massive and accelerating market. Through its diverse offerings, the Georgia-based company seeks to provide the everyday consumer with a simple way to acquire cryptocurrency. On top of that, the company strongly believes that the mass adoption of cryptos will likely continue its strong growth trajectory. “Nearly half, or 48%, of the consumers in our survey reported investing money in cryptocurrency,” said Michael.
Behind Bakkt’s Big Cryptocurrency Bet
For Bakkt, business success correlates with the adoption of Bitcoin and other digital assets. Michael explained to InvestorPlace that “For those that really haven’t jumped in yet, we saw significant interest with more than 30% saying they’re very interested or somewhat interested [in crypto].”
However, as many as 70% of survey participants admitted that they knew little or nothing at all about crypto. So, what does this mean for Bakkt?
On one hand, it suggests that the general public has not yet accepted cryptocurrency as a viable investment. On the other, it shows that cryptocurrency has room to grow.
Bakkt believes that the latter is the right conclusion. Michael sees the trend of mass adoption continuing and believes that “our platform is well-poised to fuel that growth.” And where will that growth come from? The firm believes that there is a significant opportunity to educate consumers through demystifying the world of digital assets. To do so, it provides an all-in-one app for crypto needs.
Fueling Growth and Gains Through an All-in-One App
Bakkt’s app provides crypto features such as trading, payment and loyalty programs. Michael said that Bakkt is “leading the way in providing crypto as a service to non-crypto native companies.” Through partnerships with businesses like Mastercard (NYSE:MA) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), the company works to introduce crypto to those previously unfamiliar. These partnerships also provide Bakkt with a sense of credibility and reputability. This is because both Mastercard and Google employ a strict set of standards and vetting procedures when deciding who to partner with.
Taking things a step further, Bakkt allows consumers to connect reward programs with its application. In this model, users can link rewards accounts for brands like Starbucks (NASDAQ:SBUX), Wyndham Hotels (NYSE:WH) and Chipotle (NYSE:CMG). Then, they can convert their reward points to crypto.
Effectively, Bakkt has created “a new pathway to crypto through this passive acquisition for millions of Americans.” With Bakkt, users can easily engage digital assets just by doing their everyday activities. As it battles to convert skeptics, this is key.
Bakkt has also partnered with several financial institutions. Recently, Hanover Community Bank joined Bakkt’s Early Adopter Cryptocurrency Program. The program allows participants to offer a module to its customers that will allow them to buy, sell and hold cryptocurrency. As part of the program, Hanover Bank will embed Bakkt’s functionality into its mobile banking app.
While financial institutions could easily partner with other brokerages, they offer a less-diverse package than Bakkt. For example, your everyday brokerage will not be able to connect external reward programs with its proprietary platform. Nor will it allow you to make purchases with reward points.
Bakkt’s playbook to enter into partnerships with financial institutions and consumer-facing corporations is a major driver for future growth. Since Hanover Bank has over $1.5 billion in total assets, Bakkt will be able to tap into its existing clients and increase its customer base. For Hanover customers, Bakkt is lowering the barriers of entry associated with digital assets.
Using Bakkt, customers may find out that it’s surprisingly easy to participate in crypto. This paves the way for the Georgia-based company to be a major beneficiary in the growing industry as long as acceptance and adoption of digital asset powers forward.
Could Crypto Regulations Hamper Bakkt’s Potential?
With this business model, Bakkt has a long growth runway. Since cryptocurrencies are a relatively new asset class, though, regulators are still crafting their path forward.
Therefore, a major threat to Bakkt’s business revolves around the regulatory policies concerning cryptocurrency. However, Dan O’Prey, Bakkt’s chief product officer of crypto, believes that “out of all of the players in the space, Bakkt is more on the regulatory compliant side.” In fact, O’Prey welcomes more regulation, as it will provide further clarity and help “[Bakkt] and our partners accelerate our new products to market.”
Bakkt has also been a highly regulated entity since its inception. The company was birthed out of the Intercontinental Exchange (NYSE:ICE) in 2018. ICE is a regulated data provider and operates 12 regulated exchanges and marketplaces.
Furthermore, the New York Department of Financial Services has already provided Bakkt with two key licenses: the Trust License and BitLicense. The Trust License allows Bakkt to accept deposits, make loans and act as an agent for government bodies. Meanwhile, a BitLicense is New York’s license for entities involved in “virtual currency business activity.” Companies that offer cryptocurrency exchange and trading services, like Bakkt, must receive a BitLicense in order to conduct business.
What’s Next For Bakkt?
As Bakkt continues its mission of furthering cryptocurrency adoption, part of its growth plan includes expanding available digital assets. Michael told InvestorPlace that Bakkt continues to explore expansion into various asset classes.
Non-fungible tokens (NFT) are one exciting new asset class on the company’s radar. While Bakkt has not yet announced any plans to build an NFT marketplace, its management team continues to monitor what’s trending in the world of cryptocurrency. These new digital trends will directly influence Bakkt’s growth roadmap.
In the meantime, Bakkt will strive to enable additional partnerships with existing corporations and brands. Partnering with reputable institutions that have thriving consumer bases will help Bakkt in its pursuit to familiarize consumers with cryptocurrency.
So, is BKKT stock a viable investment? Bakkt’s success will ultimately ride on the adoption of digital currencies. However, Bakkt has proven that it is a competent player in the crypto industry by offering a diverse service and building out high-profile partnerships.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
