- Eric Balchunas thinks the upcoming Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds (ETFs) in Hong Kong (HK) will not have the same level of success as their US counterparts.
- The Bloomberg ETF analyst believes they’d be lucky to get $500 million in inflows.
Approval of Spot Bitcoin and Ethereum ETFs in HK
News broke on Monday that the Hong Kong Securities and Futures Commission (SFC) approved in principle some pending spot Bitcoin and Ethereum ETF filings. Among the applicants that confirmed to have gotten the favorable notice from the regulator were China Asset Manager and Harvest Fund. Meanwhile, Bosera Asset Management and HashKey Capital said they only received conditional approval to operate their ETFs.
It’s not clear yet when will these ETFs launch. The rumor mill has it that it would be by the end of this month. However, there is already an ongoing excitement about the potential boost these new financial instruments in the East could bring on their underlying assets.
Bitcoin in particular is about to undergo its cyclical halving around April 20. So, this wider institutional adoption in Asia is anticipated to further raise its demand amid its dwindling daily supply to bump its prices to all-new heights.
Bloomberg Analyst Rains Down on the Parade
Despite the high spirits of the crypto community, especially in Asia, Bloomberg ETF analyst Eric Balchunas cleared out that these financial instruments will not be as big as their US versions.
First off, he reminded everyone on X that the Hong Kong ETF market is relatively smaller compared to the US. He estimated that the market there is only valued at around $50 billion and Chinese investors couldn’t even access them due to the ban in the mainland. Thus, their potential demand is basically limited.
Next, Balchunas pointed out that the approved entities, namely Bosera, China AMC, and Harvest Fund are virtually smaller fishes compared to whales like BlackRock and other key spot Bitcoin ETF players in the West.
Moreover, the analyst stated that the Chinese Special Administrative Region (SAR) has a less liquid and less efficient ecosystem. Hence, they may experience “wide spreads and prem discounts.”
Furthermore, they may find it hard to match the rates of the issuers in the US. Balchunas projected that these HK spot BTC and ETH ETFs will likely bear 1% to 2% fees.
Wrapping things up, he noted that although these are “additive,” they are “nickel-dime compared to the mighty US market.” Even when combined with the Ethereum ETFs, he commented that these spot crypto ETFs may only raise up to $500 million in inflows combined.