Bakkt (BKKT) Q3 2024: November Crypto Volume Surges 169% of October, Signaling Post-Election Tailwind
Bakkt’s Q3 saw a notable inflection in crypto trading volumes post-election, with November’s activity already surpassing October’s total by 69% in just 12 days. Despite revenue headwinds from normalized take rates and loyalty softness, cost discipline sharply narrowed losses. The pivot toward institutional trading and a streamlined focus after winding down Bakkt Trust positions the company to capitalize on renewed crypto momentum and regulatory clarity.
Summary
- Post-Election Crypto Surge: Trading volumes spiked dramatically after the US election, outpacing market growth.
- Strategic Refocus: Wind-down of Bakkt Trust and expansion of BACx sharpened institutional focus.
- Cost Discipline: Operating losses narrowed significantly, supporting a leaner, more resilient model.
Business Overview
Bakkt operates a digital asset platform, providing crypto trading, brokerage, and loyalty solutions for institutions and enterprises. Revenue streams are split between crypto services (trading, brokerage, custody) and loyalty services (enabling loyalty points redemption for crypto or other assets). The business is increasingly weighted toward institutional crypto infrastructure, with a growing emphasis on its BACx platform and B2B/B2B2C partnerships.
Performance Analysis
Q3 results reflected the impact of a normalized take rate and loyalty business softness, with net crypto and loyalty revenue down year-over-year. The sharpest YoY decline stemmed from a one-time revenue share uplift in 2023 not repeating, particularly in the Webull Pay relationship, reverting to standard economics in 2024. Sequentially, revenue fell as broader market trading activity softened ahead of the post-election spike.
However, Bakkt’s cost structure improved materially, with operating expenditures (excluding crypto costs) down nearly 40% YoY, driving a 48% reduction in operating loss. Crypto trading volumes rebounded sharply in October and November, with November’s first 12 days already exceeding October’s total by 69%. This surge outpaced broader market activity, highlighting Bakkt’s improved client traction and the impact of new token listings and institutional onboarding. Loyalty revenue continued to decline, reflecting a broader industry trend of reduced transaction activity.
- Volume Inflection Post-Election: Bakkt traded $279 million in notional volume in just 12 days of November, already 169% of October’s total, while the market only reached 78% of its October volume.
- Cost Takeout Drives Margin Improvement: Operating expenses fell nearly 40% YoY, with headcount reductions and settlement of costly marketing agreements contributing.
- Loyalty Headwinds Persist: Loyalty revenue declined 7.2% YoY, with transaction revenue softness driving the miss.
Cash usage was elevated by annual payments and higher reserves for trading volumes, but management expects end-of-year liquidity to remain stable after regulatory capital release from winding down Bakkt Trust.
Executive Commentary
"As of November 12th, we've already traded $279 million in notional volume, already exceeding October's total volume by $114 million. Compared to the broader market, we've achieved 169% of our total October volume in just the first 12 days of November while the market as a whole has only reached 78% of its October total, demonstrating our potential for strong performance."
Andy, CEO
"We ended the third quarter with 6.5 million crypto-enabled accounts, reflecting a steady increase over the past 12 months. This growth further underscores the increasing adoption and trust in our platform."
Karen Alexander, Chief Financial Officer
Strategic Positioning
1. Institutional Trading Focus
BACx, Bakkt’s institutional electronic communication network (ECN), launched with initial clients and is positioned as the company’s primary growth lever. The ecosystem leverages Bakkt’s compliance, Crossover Markets’ technology, Hidden Road’s credit network, and CoinRights’ trading interface, aiming to deliver sub-10 microsecond matching and customizable liquidity for institutional clients. This focus aligns Bakkt with the evolving needs of sophisticated market participants seeking secure, high-performance crypto trading infrastructure.
2. Product and Token Expansion
Bakkt accelerated new token listings, adding nine new coins in Q3 and six more in November, which contributed roughly 10% to September trading volume and improved client engagement. The company is prioritizing breadth of crypto assets to drive both volume and client stickiness, responding to client demand for a wider range of tradable assets.
3. Strategic Streamlining and Cost Management
The decision to wind down Bakkt Trust reflects a pivot away from capital-intensive, low-margin custody operations, freeing up regulatory capital and reducing ongoing costs. The move is a response to industry-wide custody margin compression, regulatory burdens, and fierce competition, allowing Bakkt to reallocate resources to higher-ROI brokerage and trading services.
4. Go-To-Market Recalibration
Bakkt shifted its sales focus to established US players and international entrants seeking institutional crypto access, resulting in an expanding pipeline and advanced-stage client discussions. This recalibration is already yielding new partnerships, as seen with Blockwire’s onboarding for end-to-end brokerage infrastructure.
5. Regulatory and Macro Tailwinds
Favorable post-election sentiment, bipartisan support for crypto, and Federal Reserve rate cuts provide a supportive backdrop, with management citing these as catalysts for increased trading activity and industry maturation. Recent SEC approvals and accounting changes further legitimize crypto as an asset class and broaden institutional adoption.
Key Considerations
Bakkt’s Q3 was defined by a strategic narrowing of focus, operational discipline, and the first visible signs of renewed crypto enthusiasm post-election. Investors should weigh the durability of recent trading volume spikes against ongoing loyalty headwinds and the company’s ability to convert its institutional pipeline into recurring revenue.
Key Considerations:
- Volume-Driven Upside: Sustained trading activity will be critical to offsetting lower take rates and loyalty revenue declines.
- Institutional Traction: BACx success hinges on onboarding and ramping institutional clients beyond initial pilots.
- Cost Structure Flexibility: Continued discipline is necessary as revenue mix shifts and loyalty softness persists.
- Regulatory Capital Release: Winding down Bakkt Trust should provide liquidity and operational flexibility, but execution risk remains during the transition.
Risks
Bakkt faces several material risks: Trading volume is highly sensitive to crypto market sentiment, which remains volatile. The loyalty business continues to contract, pressuring diversification. Execution risk exists around BACx scaling and the wind-down of Bakkt Trust. Regulatory changes, while recently favorable, could shift abruptly. Finally, cash burn and liquidity management remain key watchpoints given ongoing losses and the need for sustained volume growth to achieve profitability.
Forward Outlook
For Q4 2024, Bakkt guided to:
- Loyalty revenue of $49 to $50 million for the full year, down from prior guidance.
- Crypto net revenue contribution at the low end of the $10 to $15 million range.
For full-year 2024, management expects:
- Year-end cash, cash equivalents, and available for sale securities of $34 to $39 million, reflecting lower revenue and higher professional services expenses.
Management highlighted several factors that will shape Q4 and beyond:
- Potential for sustained trading volume tailwinds if positive market sentiment holds.
- Continued cost optimization and capital release from Bakkt Trust wind-down.
Takeaways
Bakkt’s Q3 marked a turning point in trading activity, but the durability of this momentum will be tested in coming quarters as loyalty revenue declines and the company transitions to an institutional-first model.
- Volume Inflection: Post-election surge demonstrates Bakkt’s ability to capture market share when crypto sentiment improves, but sustainability is unproven.
- Strategic Streamlining: Exit from Bakkt Trust and focus on BACx reduces complexity and capital intensity, but increases reliance on trading volume and institutional adoption.
- Pipeline Conversion: Investors should monitor new client onboarding and the ability of BACx to drive recurring, high-margin revenue as the key to long-term value creation.
Conclusion
Bakkt’s Q3 was a quarter of transition, marked by cost discipline, a sharp pivot toward institutional trading, and a post-election volume surge. The company is now more focused, but must prove it can sustain growth, convert its pipeline, and manage through ongoing loyalty headwinds to achieve lasting profitability.
Industry Read-Through
Bakkt’s experience this quarter highlights several industry truths: Crypto trading platforms are highly levered to macro and regulatory catalysts, with volume spikes possible but difficult to forecast. Institutional infrastructure is becoming the battleground, as retail growth slows and custody margins compress. The wind-down of Bakkt Trust signals that capital-intensive, low-margin custody models are increasingly untenable for mid-sized players, with scale and regulatory agility now essential. Competitors should watch for further consolidation, increased emphasis on trading technology partnerships, and a shift in focus from consumer-facing to institutional-grade solutions as the digital asset ecosystem matures and regulatory clarity improves.