Spot Bitcoin ETF will pave the way for pension fund investment: CBOE

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Spot Bitcoin (BTC) exchange-traded funds (ETFs) will attract a whole new wave of institutional investors, says America’s largest options exchange, the Chicago Board Options Exchange (CBOE).

In a Jan. 2 interview on Bloomberg TV, CBOE Digital president John Palmer said that an approval will open the door to a new wave of institutional and, eventually, retail interest in Bitcoin derivatives.

“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 currently unable to gain direct exposure to Bitcoin.

An RIA is a company registered with federal or state regulatory agencies to provide investment advice.

Palmer’s comments come one week out from the SEC’s Jan. 10 deadline, where it will be forced to decide whether or not to approve the ARK Invest 21 Shares Bitcoin ETF application.  

Additionally, Palmer expects Bitcoin derivatives products to expand significantly following the potential approval of a spot ETF. Institutional players will inevitably “lean on those derivatives more and more” to hedge risks, he added.

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

Palmer said “It’s going to be hard to judge what the [investor] breakdown is going to be yet,” he said, noting that institutions lead the way in gaining access to hedging tools. “But retail will also look for that as well.”

CBOE Digital is the crypto division of the exchange, which offers crypto futures and options trading. It plans to launch margined Bitcoin and Ether derivatives trading on Jan. 11, allowing investors to trade the contracts without supplying the full collateral.

Related: Spot Bitcoin ETFs could be rejected if the SEC wants ‘more time’ — Analyst

Meanwhile, some mutual funds have started to float plans to gain greater exposure to spot Bitcoin ETFs once approved.

On Jan 2, mutual fund manager Advisors Preferred Trust adjusted its prospectus so that the fund “may invest up to 15% of its total assets to indirectly gain exposure to Bitcoin, through shares of Grayscale Bitcoin Trust, ProShares Bitcoin Strategy ETF, and Bitcoin futures contracts.”

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