Analyst Questions Prospects for Spot Bitcoin ETFs in Hong Kong

Cryptocurrency ETFs listed in Hong Kong would be “lucky” to attract a total of $500 million, according to Bloomberg analyst Eric Balchunas.

Latest on HK spot Bitcoin ETFs: They have been approved to exist but not launch (yet). Rumor has it launching next wk so to not compete w Dubai conf. Don’t expect a lot of flows (I saw one estimate of $25b that’s insane). We think they’ll be lucky to get $500m. Here’s why:
1. HK…

— Eric Balchunas (@EricBalchunas) April 15, 2024

The expert clarified that the figure he mentioned includes both Bitcoin and Ethereum-based exchange-traded funds.

On April 15, SFC approved both types of instruments. Products from Boshi International, HashKey Capital, China Asset Management, and Harvest Investment received registration.

Balchunas opined that the ETF market in Hong Kong is “child’s play” compared to the much larger American segment. It is “tiny” (AUM of only $50 billion) and does not provide official access to residents of mainland China.

In the US, the daily volume of Bitcoin-based exchange-traded funds exceeded $200 billion, while instruments from BlackRock and Fidelity attracted a total of about $30 billion.

“Don’t expect a lot of flows,” the specialist warned.

The analyst described Matrixport’s projected $25 billion as “insane.”

Balchunas emphasized that his sentiments should not be perceived as bearish.

“All of this is undoubtedly positive for Bitcoin as it opens up more investment opportunities, but I’m just saying it’s child’s play compared to the American market. The underlying ecosystem is less liquid/efficient,” he explained.

The analyst predicted that crypto-ETFs in Hong Kong will be characterized by:

• wide spreads;
• deviations from NAV;
• high fees.

The latter parameter could be 1-2% compared to 0.25% in the US.

According to OSL Chairman and CEO Patrick Pan, spot Bitcoin ETFs in Hong Kong could launch at the end of April, provided there is “smooth” interaction with the regulator. The company acts as a sub-custodian and infrastructure service provider for two exchange-traded fund issuers.

According to the top manager, a product based on digital gold will initially appear, followed shortly by an Ethereum-based counterpart.

“All parties are working promptly to complete the process. Specific dates remain unconfirmed at this time,” the top manager stated.

Back in November 2023, ForkLog reported that the SFC was considering granting retail investors access to spot Bitcoin ETFs.

Later, a member of the local Legislative Council, Johnny Ng Kit-chong, stated the need for the jurisdiction to “take the initiative” in the implementation of crypto funds.