CBOE Digital president says a spot bitcoin ETF approval will promote derivatives growth

CBOE’s John Palmer said that potential bitcoin ETF approvals would “pave the way” for pension funds to invest in a spot bitcoin ETF

by Katherine Ross /

January 2, 2024 05:41 pm

JHVEPhoto/Shutterstock modified by Blockworks

CBOE Digital President John Palmer says that the potential approval for a spot bitcoin ETF could broaden the ecosystem for institutions and retail.

“I think seeing that approval really is gonna pave the way for pension funds and RIA-based funds to be able to invest assets in a spot Bitcoin ETF where they may not be able to gain that access today and just a native spot, Bitcoin token,” Palmer said.

Any potential approvals for an ETF could also change how institutions approach derivatives, Palmer added. Derivatives include options and futures contracts.

“So you have more players, institutional players that are used to hedging their risk. And so they lean on derivatives quite heavily to be able to hedge that risk…And so, as that ecosystem evolves, they’re going to lean on those derivatives more and more,” Palmer said.

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“So I think we’ll see that ecosystem on the derivative side, grow with the growth in the spot ETF as well.”

However, Palmer doesn’t think that the total breakdown will just be institutions. While he added that “it’s gonna be hard to judge what the breakdown is gonna be yet,” he also added that “institutions will lead the way” with the spot bitcoin ETF-involved participants using the hedging tools, but “retail will also look for that as well.”

Overall, ETFs give both institutions and retail a “broader ecosystem,” according to Palmer.

The US Securities and Exchange Commission is expected to hand down a decision on potential spot bitcoin ETFs by January 10. Ahead of the new year, a handful of potential issuers submitted fresh amendments to their S-1s, with firms including BlackRock disclosing authorized participants.

As Blockworks previously reported, the inclusion of APs is one of the details that the SEC is looking for ahead of potential approval.

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

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