Imagine that on Oct. 18, 2021, you had an epiphany to buy shares of Bakkt Holdings (NYSE:BKKT) and keep them for about two weeks. On Nov. 1, 2021, you had the best idea ever, at least for 2021. At some point, you checked your trading account, and you could not believe your eyes! Your BKKT stock reached a high of $50.80. You had a return of 479%, turning your hypothetical investment of $100,000 into $579,900! You decide not to get greedy and do what every rational person would do, press the sell button on your stock brokerage platform.

Let’s call this investor the lucky one. As you guess there is another investor, the unlucky one. Assuming the unlucky investor invested the same amount hypothetically under the same trading conditions. They would check their trading balance of BKKT stock on Jan. 6, 2022, hoping that Santa’s stock market rally would be in full force. Sadly, the reality is a harsh one with 30% losses.

As you may have surmised by now, I am not bullish on Bakkt. I will try to state my case as to why I believe this and why BKKT stock should simply be avoided.

Bakkt & Crypto

Bakkt Holdings is a digital asset platform story that has not gone as expected given the fact that it is a subsidiary of Intercontinental Exchange Holdings (NYSE:ICE).

This technology firm combines the hot trend of SPACs, with the cryptocurrency market in, according to their website, “connecting the digital economy” with the mission to “power commerce by reimagining the digital asset ecosystem.”

Bakkt and VPC Impact Acquisition Holdings merged, and investors got access to BKKT public stock in October 2021. What a digital asset experience so far, full of excitement, and drama.

I believe that the person who operates Bakkt’s blog celebrating the milestone of going public is either bringing bad luck, maybe got fired, or is too busy to update the content as the updates are infrequent.

Another blog post about Bakkt partnering with BringMeThat.com to connect the gid economy with crypto experiences is making me incredibly skeptical about the idea of offering cryptocurrency as a means of payment.

Cryptos are very volatile and not a generally accepted payment method for goods and services. If I was offered compensation in cryptocurrency rather than fiat money, I would decline it immediately. Cryptocurrency is the opposite of stable assets, and the latest Federal Reserve comments that signal tighter monetary policy sooner than expected does not support risky assets such as cryptocurrencies.

BKKT Stock: Where Is the Economic Moat?

In the company’s Analyst Day presentation, the digital asset platform identified the problem of being hard to manage all of your digital assets. Bakkt’s list of “digital assets” range from non-fungible token (NFTs) to loyalty points and equities. But why is this so hard? Where’s the problem this solution is looking for?

To me, it seems like a marketing attempt to artificially create a problem.

Not all folks who deal with digital assets have an interest in NFTs or even crypto. The pandemic has hurt airline and hotel awards so the value added there is negligible right now. And equities are easier to manage on other more specialized brokerage platforms.

It is not that I do not see any value in what Bakkt’s main message: to have a platform that helps you multitask and manage your digital assets. A platform in which you can invest, convert, spend, make payments, redeem rewards on. However, the goal of transforming consumer spending into crypto utilization is just too high risk.

I also do not argue that digital assets are not driving a new dynamic economy or that the Serviceable Addressable Market (SAM) of $1.6 trillion for digital assets is not huge.

I claim that the momentum built for the BKKT stock has been lost. And for two good reasons: weak fundamentals and a lofty valuation.

Third Quarter 2021 Earnings: Widening YoY Net Loss

Year-over-year (YoY) Bakkt reported revenue growth of 38% and an operating expense increase of 60%. Net loss of $28.8 million was higher than the net loss of $18 million in the third quarter of 2020.

A look at key priorities such as building partnerships with the business to business to consumer (B2B2C) model, enhancing products, seeking expansion opportunities all point to one growing problem: operating expenses will probably continue to increase.

For the first nine months of 2021 Bakkt has been losing money. Operating cash flow has also been negative. In other words, the company cannot yet generate cash through normal business operations. This is a severe problem.

Investors may want to give time to the public traded company to prove its platform has an economic moat. Based on the company’s widening net losses alone, the first financial results are not optimistic. I also believe that Intercontinental Exchange should not be happy at all with the latest financial performance of Bakkt. The Federal Reserve is not the only one to blame for these disappointing results.

The cryptocurrency market may deflate fast in 2022 if a risk-off mood gains popularity along with value investing. This would mean even more bad news for Bakket and BKKT stock.

On the date of publication, Stavros Georgiadis, CFA  did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.