CBOE Digital President Foresees Potential Impact of Spot Bitcoin ETF Approvals

The prospective approval of a spot bitcoin ETF, according to Chicago Board Options Exchange (CBOE) Digital President John Palmer, could expand the ecosystem for retail and institutional investors.

Palmer stated, “I believe that approval will pave the way for RIA-based funds and pension funds to invest in a spot Bitcoin ETF, a capability they may not have access to at present, and a native spot Bitcoin token.”

Palmer further stated that prospective ETF approvals could alter how institutions approach derivatives. Futures and options contracts are derivatives.

Thus, there is a more significant number of institutional participants who are accustomed to risk hedging. As a consequence, they significantly depend on derivatives as a means of mitigating that risk.

“Therefore, as that ecosystem develops, they will become increasingly dependent on derivatives,” Palmer explained.

“As a result, I believe that the expansion of the spot ETF will coincide with the development of the derivatives ecosystem.”

Palmer believes that the complete breakdown will not be limited to institutions. Although he acknowledged that “it will be difficult to predict the breakdown at this time,” he further stated that “retail will also be interested” in the spot bitcoin ETF participants utilizing the hedging tools, although “institutions will lead the way.”

ETFs provide retail and institutional investors with a “broader ecosystem,” as stated by Palmer.

By January 10, the US Securities and Exchange Commission (SEC) is anticipated to decide on potential spot bitcoin ETFs.

A few prospective issuers submitted updated amendments to their S-1s before the start of the new year; among these, BlackRock disclosed authorized participants.

As previously disclosed, the SEC is considering the incorporation of APs as a particular aspect before prospective approval.

“The SEC is prepared to approve spot bitcoin ETFs, but only if they have a signed agreement with an authorized participant and explicit language regarding cash-only creations,” Bloomberg Intelligence analyst Eric Balchunas wrote in a note published at the end of December.