According to Matthew Hougan of Bitwise, only a few out of the many recent applications for a spot Bitcoin (BTC) Exchange Traded Fund (ETF) may end up successful.
Putting it in perspective, the financial expert whose firm had equally filed for a spot Bitcoin ETF with the United States Securities and Exchange Commission (SEC) said, “ETFs are generally a ‘winner takes most’ market.”
First Movers Maintain Larger Market Shares
The first investment asset manager to receive approval for its spot Bitcoin ETF is very likely to take up a larger percentage of the market in terms of assets under management (AUM).
This situation is seen with the largest gold, crude, and crypto equity ETFs. These entities were the first movers in their various industries like SDPR’s Gold Trust which is currently boasting nearly double the amount of assets of its closest competitor.
“Imagine ETF A launches on Monday and ETF B launches on Tuesday. On Monday, ETF A will attract 100% of the assets and 100% of the trading volume. When ETF B launches on Tuesday, it will be competing with a larger and more liquid fund. All else equal, if you’re choosing between a large/liquid ETF and a smaller/illiquid ETF, you’re going to choose the large/liquid ETF. This makes it hard for second-to-market ETFs to compete,” said Hougan while trying to explain that second-to-market ETFs have a more difficult time competing.
Larger Issuer Could Take Meaningful Market Share
Nate Geraci, the president of ETFStore affirmed Hougan’s stance on second-to-market Bitcoin ETFs.
He clarified that it is more difficult for a larger firm to survive the second-to-market impediment as they may need to cut down on fees while leveraging their scale and broader distribution. Eventually, they are likely to succeed owing to their size but this is usually not the case for smaller issuers.
Therefore, there is a possibility that iShares could actually come into the BTC ETF market late and still take meaningful market share.
Push for Spot Bitcoin ETF Grows
So far, both large and smaller investment asset management firms have filed for a spot Bitcoin ETF with the SEC. BlackRock and Fidelity Investment qualify as larger issuers while the others like Valkyrie, Invesco and WisdomTree are categorized as smaller asset managers. Amongst all these entities, renowned company BlackRock was the first to submit an application with the U.S. regulator.
Meanwhile, ARK Invest which applied for the spot Bitcoin ETF with 21Shares before BlackRock has declared that their application should be given priority over all other contenders.