CBOE Eyes Institutional Surge with Spot Bitcoin ETF Approval

The Chicago Board Options Exchange (CBOE), which is the largest options exchange in the United States, believes that spot Bitcoin exchange-traded funds (ETFs) will attract a whole new wave of institutional investors.

In an interview that aired on Bloomberg TV on January 2, John Palmer, the president of CBOE Digital, stated that granting the clearance would generate a fresh surge of interest in Bitcoin derivatives from both retail and institutional investors.

“Approval is going to pave the way for pension funds and RIA-based funds to be able to invest in assets in a spot Bitcoin ETF,” he said, adding that many funds are now unable to acquire direct exposure to Bitcoin. “This is going to be a significant step forward for institutional investors.”

A Registered Financial Advisor (RIA) is a corporation registered with either federal or state regulatory agencies to provide financial advice.

The statements made by Palmer come one week before the deadline of January 10th, when the Securities and Exchange Commission (SEC) would be required to decide whether or not to approve the application for the ARK Invest 21 Shares Bitcoin ETF.

In addition, Palmer anticipates that the market for Bitcoin derivatives products will dramatically expand after the possible approval of a spot exchange-traded fund by the government. To protect themselves from potential losses, institutional players will invariably “lean on those derivatives more and more,” he warned.

CBOE Digital President on spot Bitcoin ETFs and derivatives. Source: Bloomberg

Palmer made the following statement: “It is going to be difficult to judge what the [investor] breakdown is going to be yet,” pointing out that institutions are the ones who are leading the way in acquiring access to hedging instruments.

The retail sector, on the other hand, will also hunt for that. CBOE Digital is the cryptocurrency part of the exchange, and it provides trading opportunities for cryptocurrency futures and options.

On January 11, it intends to begin margined trading for Bitcoin and Ethereum derivatives, which would enable investors to trade contracts without having to provide the whole collateral. Meanwhile, several mutual funds are discussing increasing their exposure to spot Bitcoin exchange-traded funds (ETFs) once they are approved.

On January 2, the mutual fund management Advisors Preferred Trust modified its prospectus to state that the fund “may invest up to 15% of its total assets in Bitcoin indirectly, through shares of Grayscale Bitcoin Trust, ProShares Bitcoin Strategy ETF, and Bitcoin futures contracts.”

This meant that the fund could potentially invest up to 15% of its total assets in bitcoin.