The Chicago Board Options Exchange (CBOE), one of America’s premier options exchanges, anticipates that the approval of spot Bitcoin exchange-traded funds (ETFs) will usher in a new era of institutional investment in Bitcoin.
John Palmer, President of CBOE Digital, in a Bloomberg TV interview on January 2, expressed confidence that the approval of a spot Bitcoin ETF would significantly expand the scope of institutional and eventually retail engagement with Bitcoin derivatives.
“Once a spot Bitcoin ETF is approved, it will create opportunities for pension funds and RIA-based funds to invest in Bitcoin assets, which is currently challenging due to restrictions on direct Bitcoin exposure,” Palmer noted.
RIAs, or Registered Investment Advisors, are firms registered with state or federal regulatory authorities to offer investment advice.
Palmer’s comments are particularly timely as they arrive just a week before the January 10 deadline set by the Securities and Exchange Commission (SEC) for deciding on the ARK Invest 21 Shares Bitcoin ETF application.
Palmer also predicts a substantial increase in Bitcoin derivatives products following any approval of a spot ETF. He foresees that institutional investors will increasingly rely on these derivatives to manage risks.
CBOE Digital, the cryptocurrency arm of the exchange, offers trading in crypto futures and options. The division is set to launch trading in margined Bitcoin and Ether derivatives on January 11, allowing investors to trade these contracts without needing to provide full collateral.
Reflecting on the potential investor base for these derivatives, Palmer said, “It’s difficult to predict the exact breakdown of institutional versus retail investors, but institutions are typically the first to access these hedging tools, with retail investors following suit.”
In a related development, some mutual funds are already preparing for greater exposure to spot Bitcoin ETFs, pending approval. On January 2, Advisors Preferred Trust revised its prospectus to enable the fund to allocate up to 15% of its total assets for indirect Bitcoin exposure through investments in the Grayscale Bitcoin Trust, ProShares Bitcoin Strategy ETF, and Bitcoin futures contracts.