By Sharan Kaur Phillora
Hong Kong’s financial markets witnessed a historic moment with the debut of Asia’s first spot bitcoin and ether exchange-traded funds (ETFs) managed by China Asset Management, Harvest Global, and Bosera/HashKey. Despite the anticipation, the launch was perceived as underwhelming when compared to the explosive start of similar ETFs in the United States.
Here’s what we know:
On their first day, the six new ETFs—comprising separate bitcoin and ether funds from each issuer—recorded a modest combined trading volume of $11.2 million. This figure starkly contrasts with the $4.5 billion volume seen on the first day of the U.S. bitcoin spot ETFs launched earlier this year. Analysts cautioned about setting expectations too high, noting the smaller size of Hong Kong’s ETF market compared to that of the U.S., as well as the regulatory and market dynamics that might affect uptake.
Experts like Bloomberg ETF analyst Eric Balchunas pointed out that the performance, although seemingly modest, was significant within the context of the Hong Kong market. For instance, ChinaAMC’s bitcoin ETF attracted $123 million on its first day, ranking it impressively among new ETF launches in Hong Kong over the past three years.
The introduction of these ETFs in Hong Kong differs significantly from those in the U.S., particularly in terms of investment mechanics. Hong Kong ETFs allow both cash and in-kind subscriptions, enabling direct use of bitcoin or ether to trade ETF shares, a method not permitted in the U.S. where subscriptions and redemptions are cash-based. This regulatory flexibility is seen as a step forward for the crypto market in Asia, despite the cautious approach by investors.
Further challenges include higher management fees in Hong Kong, estimated at 1-2%, compared to lower fees in the U.S., and potential liquidity issues that could impact trading efficiency. However, the long-term outlook remains positive, with expectations that these tools will promote broader adoption and integration of cryptocurrencies into mainstream financial systems.
As the market matures and more investors become aware of and comfortable with these products, the initial slow start could eventually pave the way for greater growth and influence, aligning Hong Kong’s crypto offerings more closely with global standards.
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.
