What happened
Shares of Bakkt Holdings (BKKT -10.13%) jumped higher on Wednesday, surging as much as 15.3%. As of 12:19 p.m. ET today, the stock had given up the majority of those gains and was up just 1.2%.
The catalyst that initially drove the cryptocurrency trading platform higher was a high-profile digital asset storage deal.
So what
Bakkt announced a partnership with Nexo -- a secure exchange where users can buy, sell, and store cryptocurrency -- to secure its digital assets in the Bakkt Warehouse, a regulated custodian for the secure storage of Bitcoin (BTC -3.28%) and Ethereum (ETH -2.23%).
Image source: Getty Images.
The surge of interest in cryptocurrencies among investors and traders alike has resulted in an increasing need for platforms to store and spread these digital assets over a number of secure storage locations for security reasons. George Manolov, business development executive at Nexo, noted the need for "a trusted partner to bring an extra level of security and credibility to our clients' cryptocurrencies." He went on to cite Bakkt's robust infrastructure and "regulation-first approach to crypto" as a good fit for the company and its clients.
Now what
There was a surge in enthusiasm for Bakkt shares immediately following the company's highly publicized special purpose acquisition company (SPAC) merger back in October. The stock rocketed as much as 400% in the days following its debut after partnering with Mastercard and Fiserv to offer cryptocurrency services to their respective customers.
Since then, however, the stock has fallen roughly 90% from those highs, as early speculators saw the massive run-up as an opportunity to book profits.
Additionally, Bakkt delivered its first financial report as a public company in November, and the results showed a company that still had plenty to prove. While revenue grew 38% year over year in the third quarter, its net loss surged 61%. It's important to remember that a good chunk of those higher costs were related to the SPAC merger, so this isn't representative of the company's potential.
Investors will be watching carefully when Bakkt delivers its fourth-quarter and full-year results in the coming weeks, which should provide a clearer picture of the company's potential.
