Unlocking Opportunities for Institutional and Retail Interest
The Chicago Board Options Exchange (CBOE) believes that the approval of spot Bitcoin (BTC) ETFs will bring a new wave of institutional investors into the market. John Palmer, the president of CBOE Digital, recently stated in an interview on Bloomberg TV that ETF approval would pave the way for pension funds and Registered Investment Advisor (RIA)-based funds to invest in Bitcoin derivatives.
Palmer emphasized that, “The approval of spot Bitcoin ETFs will unlock opportunities for pension funds and RIAs to gain exposure to Bitcoin derivatives.”
Currently, many funds face obstacles 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 be a significant development.
Potential 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.
According to Palmer, “Institutional investors will depend on these derivatives to hedge their Bitcoin holdings.”
While Palmer acknowledged that predicting the breakdown of investors is difficult, he believes that institutions are at the forefront of accessing hedging tools. Additionally, he expects retail investors to seek similar opportunities.
CBOE Digital, the cryptocurrency division of the exchange, has plans to launch margined Bitcoin and Ether derivatives trading on January 11. This will allow investors to trade these contracts without providing the full collateral, potentially attracting more interest from market participants.
Interest Growing Among Mutual Funds
In anticipation of spot Bitcoin ETF approval, some mutual funds have already started considering plans to gain exposure to these assets. Advisors Preferred Trust, a mutual fund manager, recently adjusted its prospectus to allow for potential indirect exposure to Bitcoin.
As stated in the adjusted prospectus, 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.
The Securities and Exchange Commission (SEC) is facing a significant workload as the January 10 deadline for spot Bitcoin ETF approval approaches. According to journalist Eleanor Terrett from FOX Business, the approval of a spot Bitcoin ETF seems unlikely due to vacations and work overload at the SEC.
Terrett commented, “While the SEC is surely unpredictable, it would surprise me if approvals were to happen tomorrow.”
The SEC has historically denied or delayed spot Bitcoin 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, speculate that the SEC will approve multiple applications simultaneously to prevent any single firm from gaining a first-mover advantage.
