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Press saute button on the Instant Pot and add oil to it. Once the oil is hot, add bay leaf and onions. Cook the onions till they are soft, around 3 minutes.
Add diced jalapeños, chopped garlic and saute for 30 seconds.
Add the spices- chipotle powder, cumin powder, smoked paprika and mix. Cook the spices for 30 seconds.
Stir in black beans, diced tomatoes and salt. Cook the beans and tomatoes with the spices for 2-3 minutes and then add vegetable broth (or water) and deglaze the pot by scrapping the bottom. There shouldn't be at burnt bits stuck at the bottom of the pot.
Add butternut squash on top, do not stir.
Close the lid and set valve to sealing. Press the manual/pressure cook button and cook on high pressure for 5 minutes. The pressure valve should be in the sealing position.
Let the pressure release naturally for 5 minutes and then do a quick pressure release by manually moving the pressure valve from sealing to venting position.
Stir in lime juice and serve butternut squash chili with diced avocado, cilantro and lime wedge!