CBOE Predicts Spot Bitcoin ETFs to Draw Investments from Pension Funds and RIA-Based Funds

The Chicago Board Options Exchange (CBOE) believes the approval of spot Bitcoin (BTC) ETFs will usher in a new wave of institutional investors.

 In a recent interview on Bloomberg TV, John Palmer, the president of CBOE Digital, said that ETF approval would unlock opportunities for institutional and retail interest in Bitcoin derivatives.

Palmer emphasized that the approval of spot Bitcoin ETFs would pave the way for pension funds and Registered Investment Advisor (RIA)-based funds to invest in these assets. 

Currently, many funds face barriers when seeking direct exposure to Bitcoin. RIAs are companies registered with regulatory agencies to offer investment advice, and their entry into the Bitcoin market would mark a significant development.

The statement from Palmer comes just a week before the Securities and Exchange Commission (SEC) deadline of January 10, when it will decide whether to approve the ARK Invest 21 Shares Bitcoin ETF application. 

The outcome of this decision could have far-reaching implications for the market.

CBOE President Palmer Expects Expansion of Bitcoin Derivatives Products

Palmer also anticipates a substantial expansion of Bitcoin derivatives products if a spot ETF is approved. Institutional investors are likely to increasingly rely on these derivatives to mitigate risks associated with Bitcoin holdings.While Palmer acknowledged that it is challenging to predict the breakdown of investors, he acknowledged that institutions are at the forefront of accessing hedging tools. However, he also believes that retail investors will seek similar opportunities.CBOE Digital, the cryptocurrency division of the exchange, is planning to launch margined Bitcoin and Ether derivatives trading on January 11. This will enable investors to trade these contracts without providing the full collateral, potentially attracting more interest from market participants.In the wake of the anticipated ETF approval, some mutual funds have already started considering plans to gain exposure to spot Bitcoin ETFs. Advisors Preferred Trust, a mutual fund manager, recently adjusted its prospectus to allow for potential indirect exposure to Bitcoin. The fund may invest up to 15% of its total assets in shares of Grayscale Bitcoin Trust, ProShares Bitcoin Strategy ETF, and Bitcoin futures contracts.

SEC Overwhelmed With Paperwork as Deadline for Spot ETFs Approach

The SEC is reportedly swamped with a substantial amount of paperwork as the January 10 deadline for the approval of spot Bitcoin ETFs approaches. According to Eleanor Terrett, a journalist for FOX Business, a spot Bitcoin ETF approval seems unlikely amid vacations and work overload. “While the SEC is surely unpredictable, it would surprise me if approvals were to happen tomorrow,” she said. 

“From what I understand through conversations I’ve had with issuers, the SEC still has to review all the changes made to the S-1s filed on Thursday/Friday AND make comments on them.” 

While the @SECGov is surely unpredictable, it would surprise me if approvals were to happen tomorrow.

From what I understand through conversations I’ve had with issuers, the SEC still has to review all the changes made to the S-1s filed on Thursday/Friday AND make comments on… https://t.co/CnkYdXsbD4

— Eleanor Terrett (@EleanorTerrett) January 1, 2024

The SEC has historically denied or delayed spotcoin ETFs due to concerns over market manipulation and investor protection. 

However, following a landmark lawsuit loss to Grayscale Investments in August, the agency began collaborating more closely with a dozen firms to explore the possibility of bringing such funds to the market. 

Many industry participants, including Cathie Wood of ARK Invest, believe that the SEC will approve multiple applications simultaneously to prevent any single firm from gaining a first-mover advantage.