Bakkt, the cryptocurrency platform launched with great fanfare in 2018 by the owner of the New York Stock Exchange, has sent shivers through the industry with its latest SEC filing and cast doubt on its ability to continue operating. The once-lauded “Bitcoin savior” now faces an uncertain future due to limited cash reserves and ambitious expansion plans, raising concerns for investors and the broader crypto market.
Danger of closure on the cryptocurrency platform
Founded by Intercontinental Exchange (ICE), Bakkt created excitement in the market. Especially in the beginning, Starbucks aimed to revolutionize payments by allowing its customers to buy coffee with Bitcoin. However, this dream was dashed and the platform eventually pivoted to business-to-business technology services, offering crypto custody and trading solutions. This shift reflected the broader difficulties of integrating Bitcoin into everyday payment systems, despite efforts such as the Lightning Network.
The SEC filing paints a bleak picture. Bakkt acknowledges that its current cash and restricted cash may not be sufficient to sustain its operations over the next 12 months. Ambitious expansion plans for new markets attract attention. And the situation is made worse by its inability to guarantee significant revenue growth beyond historical levels. The company projects operating losses. It also warns of potential liquidity problems unless additional capital is secured. These statements triggered a 7.5% drop in Bakkt’s stock price in after-hours trading. Thus, it revealed the concerns of investors.
There are internal control uncertainties
Adding to the concerns, Bakkt acknowledged limitations on its accounting and finance staff. Namely, it raised questions about internal control systems and their compliance with SEC regulations. The company intends to improve these controls. However, there is a great possibility that unidentified deficiencies or weaknesses may emerge. This further erodes investor confidence. Bakkt is currently trying to raise $150 million in securities. So this has the potential to provide a lifeline. However, the success of this effort remains uncertain.
Moreover, even if it succeeds, there is a possibility that it will not be enough to guarantee long-term viability. The company’s future depends on its ability to raise additional financing, achieve significant revenue growth and strengthen its internal controls. Bakkt’s struggles are a worrying sign for the crypto industry, especially for platforms that face similar challenges in scaling and achieving profitability. Bakkt went public in 2021. The stock closed at $1.45 on Wednesday, having traded above $40 in 2021. Kelly Loeffler, who later became a U.S. Senator, served as the company’s inaugural CEO. In 2021, Bakkt launched a digital wallet. But then the company shifted its focus to providing business-to-business technology services. For this reason, this application has been stopped.
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