April 19, 2024
By Sharan Kaur Phillora
The prospect of mainland Chinese investors participating in the newly approved Hong Kong-listed spot bitcoin ETFs has been dimmed, according to analysts at Bloomberg Intelligence. Despite the initial enthusiasm surrounding these funds, restrictions remain tight following China’s 2021 ban on cryptocurrency trading and mining.
Here’s what we know:
On Monday, Hong Kong regulators greenlit the ETFs, signaling a potential new influx of investments into Bitcoin. The ETFs are being launched by notable issuers such as ChinaAMC, Harvest Global, and Bosera International. However, this approval was disclosed by the issuers rather than the Securities and Futures Commission (SFC) of Hong Kong, which has not commented on the matter.
The approval had been viewed as a possible major boost for bitcoin prices, with Matrixport suggesting last week that these funds could attract as much as $25 billion from Chinese investors. However, a report by Wu Blockchain earlier this week clarified that “southbound funds,” or investments from mainland China, are barred from participating in these ETFs.
The exclusion of mainland Chinese investors may curb the impact of the Hong Kong ETFs in a global context. While the U.S. spot bitcoin ETFs have drawn significant attention and capital, the smaller scale of Hong Kong’s ETF market limits its overall influence. According to Bitwise’s Chief Investment Officer Matt Hougan, although the ETFs are a positive development, they are not transformative for the market.
Eric Balchunas of Bloomberg ETFs also noted the disparity in market scale between the U.S. and Hong Kong, predicting that combined inflows are unlikely to exceed $1 billion—a stark contrast to earlier, more optimistic forecasts. He suggested that the primary beneficiaries of the Hong Kong ETFs might be institutional investors seeking extended trading hours across different markets.
Despite these institutional advantages, the overall uptake by fund managers has been modest, as indicated by SEC filings. This highlights the limited immediate impact of Hong Kong’s new bitcoin ETF offerings on the broader cryptocurrency landscape.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.
