Bitwise’s Matthew Hougan believes the spot Bitcoin ETF market will be highly competitive with a dominant player.
Matthew Hougan of Bitwise suggests that while many contenders are seeking approval from the US Securities and Exchange Commission (SEC) to launch a spot Bitcoin ETF, only a few will ultimately achieve success.
According to Matthew Hougan from Bitwise, the market for ETFs typically follows a “winner takes most” pattern. Hougan’s firm recently resubmitted its application for a spot Bitcoin ETF on June 16.
Usually, the company that launches the first ETF in a particular sector tends to attract the most assets under management. This trend can be observed in sectors such as gold, crude oil, and crypto equity ETFs. For example, SDPR’s Gold Trust, being the first mover in the gold ETF space, currently holds nearly twice as many assets as its closest competitor.
Hougan explained that ETFs that enter the market after the first one face greater challenges in competing. He gave an example: If ETF A launches on Monday and ETF B launches on Tuesday, ETF A will initially attract all the assets and trading volume. When ETF B enters the market on Tuesday, it will have to compete with a larger and more liquid fund. Generally, investors prefer larger and more liquid ETFs over smaller and illiquid ones. This creates difficulties for second-to-market ETFs to compete effectively.
Nate Geraci, the president of ETFStore, agreed with this view, stating that even larger issuers can find it challenging to overcome the disadvantage of being second-to-market. To overcome this, they often need to offer lower fees by leveraging their size and wider distribution network.
Geraci also mentioned that in the case of bitcoin ETFs, he believes that iShares, a larger issuer, could enter the market later and still capture a significant portion of the market. However, he added that it would be much more difficult, if not nearly impossible, for smaller issuers to enter the market late and compete effectively.
Up to this point, well-known financial giants such as Fidelity and BlackRock have submitted applications for bitcoin ETFs, along with smaller companies like Valkyrie Investments, WisdomTree, and Invesco.
Cathie Wood’s ARK, in collaboration with European asset manager 21Shares, has filed for a spot bitcoin ETF and claims to be at the forefront of regulatory approval. However, there is also a chance that the regulatory agency might approve all the recently filed funds to ensure fair competition among them.
In such a scenario, it is expected that there will be winners in three different categories. Some investors may prefer specialized ETF providers like Bitwise, while others may lean towards more traditional firms like BlackRock. Additionally, there will be investors who prioritize finding the most cost-effective option available.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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