Bitcoin Spot ETFs to Attract Pension Funds

Bitcoin spot ETFs will attract many institutional investors, including pension funds, CBOE Digital’s president John Palmer said in an interview with Bloomberg.

CBOE Digital’s president, John Palmer, forecasts more and more institutional investors to approach bitcoin assets in the future. In the interview with Bloomberg, Palmer says that if US regulators were to approve the first-ever spot exchange-traded fund for cryptocurrency, there would be a high chance that new institutional investors, including pension funds and registered investment adviser-based vehicles, would flock to Bitcoin assets.

A spot ETF approval will also be a big bullish factor for the market, improving sentiments and attracting more investors to invest in Bitcoin assets, Palmer added.

CBOE Digital is also currently planning to launch margined Bitcoin and Ether futures on January 11, which will allow clients to trade futures without posting the full collateral upfront.

Institutional players to “lean on derivatives” to hedge risk

As and when an ecosystem of spot Bitcoin ETFs evolves, Palmer sees pension funds and registered investment adviser-based vehicles to hedge some of the risk while trading on Bitcoin ETFs.

This would lead to investors accessing crypto derivatives on a large scale, something seen predominantly in international markets. A growing investor appetite would also result in the same trend being followed in the United States.

According to Ernst and Young’s research, institutional investors with smaller assets under management tend to allocate a greater portion of their portfolio to blockchain products. Notably, around 45% of institutions with more than $500 billion in AUM allocate more than 1% of their portfolio to crypto derivatives.

Bitcoin’s Bullish Momentum in 2024

The year 2023 was one of the best years in the history of cryptocurrencies, as blue-chip crypto coins like Bitcoin and Ethereum delivered returns of over 155% and 90%, respectively, to their investors. Data from the Deribit derivatives exchange shows an uptick in activity from institutional investors since October 2023, with Bitcoin hitting around the 35,000 USDT mark.

If the spot ETF approval does go through, several analysts have predicted the Bitcoin price to hit a new all-time high post-approval. Meanwhile, the market has also noted significant optimism due to the speculations over Bitcoin spot ETF approval, especially since mid-November.

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