Bakkt (BKKT) stock spikes 16% on custody agreement with Nexo
19:25, 19 January 2022
Digital asset platform Bakkt Holdings and cryptocurrency financial services company Nexo announced a partnership for Bakkt to custody bitcoin and ether in the Bakkt Warehouse.
The partnership gives Bakkt (BKKT) additional cryptocurrency reserve liquidity, while Nexo gets an undisclosed return on its assets.
“While some of these updates might seem mundane from the standpoint of traditional finance, (this is) hugely important in the context of crypto,” said Nexo Head of Communications Troy Gravitt. “It's the first-hand mainstreaming of the technology. It's a technology that looks increasingly like it will one day replace the underlying mechanics of most of the US and global financial system.”
The news sent Bakkt stock spiking 16.3% in early Wednesday trading to a $6.04 per share session high, from Tuesday’s $5.24 closing share price. Bakkt stock gave back its early gains, however, as equities experience a broader sell-off.
In late afternoon trading, Bakkt stock was 3.44% lower on the session at $5.06 per share. Over 15 million Bakkt shares traded Wednesday. Bakkt Holdings trades over the Nasdaq exchange under the ticker BKKT.
Nexo is not a publicly traded company but has a Nexo token, which was quoted at $2.27 by Coinbase, up 1.37% over the past 24-hour period. The Nexo coin has a $1.3bn market capitalisation and 560 million coins in circulation, Coinbase reports, which is 56% of circulating supply.
Added security for Nexo
The partnership offers an additional layer of security for Nexo, which is already insured for up to $375m and offers warm storage in military-grade vaults. The Bakkt Warehouse stores cryptocurrency assets in both warm and cold storage, rebalancing periodically.
Nexo, a cryptocurrency financial services company, allows users to borrow against, lend at interest and trade digital assets.
“As a lender - much like any bank or other lender - there's a need to custody with various institutional partners, too,” said Nexo’s Gravitt. “Having multiple counterparties reduces counterparty risk from any one relationship. If there were to be some catastrophic event, not all funds would be in play.”
Liquidity for Bakkt
As for Bakkt, the digital assets stored in its warehouse give it additional liquidity on hand, similar to any bank.
Warm, or online, storage offers users easier access and liquidity but comes with inherent security risks. Cold, or offline, storage is a physical storage wallet that needs to be connected to an online platform to transfer digital assets.
“As we build upon our partnerships with businesses and expand our network of operations and revenue, secure custody continues to be a pillar of Bakkt's strategy, leveraging state-of-the-art physical and cyber security, institutional-grade technology and governance, and backed by insurance,” said Bakkt chief product officer of crypto Dan O'Prey in a release.
“We recognized that Bakkt’s infrastructure and regulation-first approach to crypto was a natural fit, and we’re confident that this partnership will benefit all our clients and expand Nexo’s ability to service the unprecedented institutional demand for cryptocurrencies as well as individuals’ growing transaction volumes,” added Nexo business development executive George Manolo in the same release.
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