Why do you think Wall St investors aren't waiting for a regulated exchange before getting into Bitcoin. How is that nonsensical? That is probably what a lot of them are waiting for.
Ever heard of LedgerX? They are a CFTC-approved swap execution facility. They offer physically-settled Bitcoin derivatives, including options and swaps. They are a clearinghouse that handles Bitcoin custody on behalf of brokers and clients. They were approved by the CFTC well over a year ago. Now they're waiting for CFTC approval for physically-settled Ethereum derivatives.
What were you saying about regulated exchanges again?
I also find it baffling how people say "cash-settled futures" (like the Cboe and CME Bitcoin markets) aren't appropriate for Wall Street because it's just "betting on the price." What exactly do you think derivative markets are for, if not speculative exposure to market volatility? If an institution wants exposure to the Bitcoin market, why would they specifically not want to acquire CME Bitcoin quarterlies? If they wanted exposure past settlement date, why couldn't they just roll over their contracts?
Wall St mostly has no interest in throwing their money into these crypto exchanges that get hacked every few months.
Nobody said anything like that. LedgerX and CME =/= Mt Gox and Bitfinex. More importantly, there are several robust institutional custody solutions and a liquid OTC market. That's why hedge funds have been in the game for several years already.
The point of physically settled bitcoin futures on BAKKT is that BAKKT has to actually hold all the Bitcoin. They have to buy up the supply for whatever volume they have.
No, they don't. They need assets equivalent to the USD value of outstanding Bitcoin contracts. This is not an ETF: BTC are not held in trust with shares issued against them.
Again, the proper parallel is CME/COMEX physically-settled gold markets. There are way more gold contracts than gold in their vaults. There are multiple registered "owners" for every physical claim to gold.
If everyone who is long BTC on BAKKT wanted to physically settle, they probably couldn't. The truth is, they probably don't want to. Like the gold markets, the vast majority of market participants are just betting on the price. They don't want to accumulate the underlying.
Which brings us back to why cash-settled futures are perfectly appropriate for institutional exposure to BTC.