The ProShares Bitcoin Strategy ETF, known by the ticker BITO, was the first bitcoin futures ETF to launch in the U.S. Today it has 91% of the assets among bitcoin futures ETFs and 97% of the trading volume market share, Mr. Balchunas said.
"So, it is a winner-take-all — or at least most — market with ETFs," he said. "And we've seen this historically as ETF analysts, if you get out first, you tend to have it made basically."
All of the proposed spot bitcoin ETFs will do the same thing — store bitcoin, Mr. Balchunas said, adding that the one that gets the most volume, will get even more volume.
"Volume begets volume," Mr. Balchunas said. "There's only room for one superstar stud spot bitcoin ETF."
He pointed to State Street Global Advisors' SPDR Gold Shares, which was launched in November 2004 and is known by the ticker GLD. While plenty of other gold ETFs exist, GLD remains the "go-to" option for many people seeking gold exposure, Mr. Balchunas said.
"It's still the most traded to date after 20 years on the market," he said.
That's why Bloomberg Intelligence believes that BlackRock and other issuers are attracted to the idea of offering a spot bitcoin ETF, Mr. Balchunas said, adding that, to this day, GLD remains the third-most revenue-generating ETF. GLD ranked third behind Invesco QQQ and the SPDR S&P 500 ETF Trust, a presentation slide showed.
Financial advisers, whose clients include wealthy baby boomers, "love ETFs," Mr. Balchunas said, adding that those advisers manage $30 trillion. He sees a spot bitcoin ETF as not just an ETF but as "a bridge between that $30 trillion of largely wealthy boomer money" and the crypto world, he said.
"And that's why this is such a fascinating story and race that we're glued to even though, at the end of the day, these ETFs may make up 1% of all ETF assets," the analyst said.
Bloomberg Intelligence gets "a lot of back-channel information" from issuers themselves, Mr. Balchunas said, adding that he's heard from two different sources that the SEC doesn't want a repeat of what happened with BITO.
"They don't want to be kingmaker," the analyst said.
Mr. Balchunas believes the SEC will "work to get a few people lined up at once," when it comes to approving spot bitcoin ETFs.
"And I have to think they want to get some of the big traditional finance firms in there — the BlackRocks and Fidelitys," Mr. Balchunas said, adding that including such firms likely would make the SEC feel a bit more comfortable with the rollout.
In response to a question regarding the outlook for spot bitcoin ETF expense ratios, James Seyffart, an ETF research analyst at Bloomberg Intelligence, said he "wouldn't be surprised to see these things launching at 50 (basis points)" or perhaps even lower.
"Who knows how low it could go," Mr. Seyffart said. "It's going to be brutal."