The six new Hong Kong spot-crypto ETFs, with a focus on Bitcoin funds, are anticipated to attract initial investments of over $300 million from investors on the first day.
The first group of cryptocurrency-focused exchange-traded funds (ETFs) has debuted in Hong Kong, posing a possible threat to the widely used Bitcoin products in the US.
Listed on Tuesday in the city were Bitcoin and Ether ETFs by Harvest Global Investments Ltd., the local subsidiary of China Asset Management, in conjunction with a collaboration between HashKey Capital Ltd. and Bosera Asset Management (International) Co.
American investors have put $52 billion into Bitcoin exchange-traded funds (ETFs) since their inception in January, with issuers like BlackRock Inc. and Fidelity Investments among those contributing.
The Bitcoin and Ether funds in Hong Kong might accumulate over $1 billion in the next two years, according to Bloomberg Intelligence’s Rebecca Sin.
Harvest Global CEO Han Tongli, on the other hand, thinks the assessment is too low. In contrast to the United States, he claims, investors from both the West and the East are willing to use Hong Kong’s financial goods and services.
Consequently, the six new spot-crypto ETFs based in Hong Kong are targeting initial deposits of about $300 million, with a lean towards Bitcoin funds.
The city’s wealth storage facilities in China and the bustling crypto exchanges and market makers in the Asia-Pacific area are two possible origins of these influxes.
Even though crypto trading is illegal on China’s mainland, the new funds don’t qualify for the program that allows Chinese investors to access certain Hong Kong ETFs; this makes one wonder whether the program may be extended down the road.
What distinguishes Hong Kong from other jurisdictions is its use of an in-kind ETF subscription and redemption method.
Unlike US Bitcoin funds, which employ a cash redemption approach, this model allows for the exchange of underlying assets for fund units and vice versa.
Han is of the opinion that this in-kind strategy raises the desirability of Hong Kong’s goods and services, which may lead to three times the eventual investment in ETFs as in US funds.
On the other hand, there are those who are worried that the decreased size of Hong Kong’s financial industry necessitates reevaluating anticipated demand.
The ProShares Bitcoin Strategy ETF, a derivatives-based product in the US, has $2.3 billion in assets, whereas the city’s overall assets of about $164 million are much less than that.
Despite certain problems, local items from Hong Kong are attractive because they are simple to get, especially during Asian business hours.
According to Ethan Li, Head of Products at Bosera Asset Management (International), the firm intends to increase its workforce and digital asset product pipeline, and it is confident in the attractiveness of the Hong Kong ETFs.
The value of digital assets has risen substantially since the market collapse of 2022, but this upswing has just levelled out.
At its current price of over $63,540, Bitcoin is trading at a loss of around $10,000 from its all-time high in March.
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