- The spot price ETFs spur hopes Chinese investors will get a route to invest in crypto.
- Many Hong Kong investors are keen to add the ETFs to their portfolios.
- Hong Kong is the first Asian market to green-light the popular funds.
Hong Kong just joined the crypto ETF party.
On Tuesday, three issuers listed six spot price Bitcoin and Ether exchange-traded funds in the city.
Yet unlike January, when US Bitcoin ETFs attracted billions of dollars in investment capital and sparked a record run for BTC, the Hong Kong versions are coming out amidst a deepening market lull.
With worries mounting about high interest rates in the US and geopolitical risk in the Middle East, investors pulled $435 million from digital assets last week, the biggest outflow since March, according to CoinShares.
In Hong Kong, the crypto ETFs received a rather muted reception, with total volume for the first day of trading hit $12 million, compared to $4.6 billion in the opening of the US spot Bitcoin ETF in January.
‘The enthusiastic response from investors regarding both BTC and ETH ETFs reflects a deep-seated optimism.’
— Gary Tiu, OSL
Still, money managers say there are signs local investors will flock to the new offerings.
Almost 77% of investors polled recently told OSL, a Hong Kong digital assets firm, they intended to include spot Bitcoin and Ether ETFs in their investment portfolios.
“The enthusiastic response from investors regarding both BTC and ETH ETFs reflects a deep-seated optimism about the potential of these products to enhance the financial landscape,” Gary Tiu, executive director and head of regulatory affairs at OSL, told DL News.
Waiting for China
But the big question is whether mainland Chinese will follow suit.
Investors hope the new offerings will open a long desired route to Chinese investment capital.
The three issuers are China Asset Management, Bosera Capital and Harvest Global, all of which were originally founded in mainland China.
Given their links with China, expectations are running high that mainland investors may get access to Bitcoin and Ether.
But when or if that happens — at least officially — is unclear.
Crypto trading is banned in mainland China but remains popular.
While it appears investors there will not be able to access the Hong Kong ETFs, executives from both Harvest Global and China Asset Management said in media interviews that the market may gradually open.
Yimei Li, for instance, China Asset Management’s CEO, told Bloomberg News on Tuesday that she hoped Chinese investors will be able to participate in the future.
She added that the launch opened the door for renminbi holders looking for alternative investments.
Strong sentiment
Not everyone agrees. Analysts at Bloomberg Intelligence said last week they thought official access to the ETFs remained very unlikely. Crypto futures ETFs in Hong Kong are also not accessible to mainland investors.
Still, Hong Kong investors appear to be keen on the new offerings.
The spot ETFs will join Hong Kong’s already existing virtual asset futures ETFs, which launched in late 2022.
In the first quarter of 2024, the three futures ETFs had an average daily turnover of $6.6 million, up from $1.1 million a year earlier. The first quarter of 2024 saw net inflows of $68 million into the ETFs.
Meanwhile, other Asian nations are weighing whether to permit investors to also access Bitcoin ETFs.
Callan Quinn is DL News’ Hong Kong-based Asia Correspondent. Get in touch at callan@dlnews.com.
