Challenges Ahead for Hong Kong Spot Bitcoin and Ethereum ETFs: Analyst Predicts Limited Growth
The Hong Kong Securities and Futures Commission recently approved spot Bitcoin and Ethereum exchange-traded fund applications, marking a significant milestone for the city-state’s digital assets market. However, Bloomberg ETF analyst Eric Balchunas predicts that the Hong Kong ETF market may not perform as well as the US market due to the lack of major players and the possibility of high fees.
Balchunas estimates that the Hong Kong Bitcoin and Ether ETF market may see inflows of around $500 million, a far cry from the over $15 billion generated by BlackRock’s spot Bitcoin ETF in the United States. The analyst points out that the absence of financial giants like BlackRock and Fidelity in the Hong Kong market, as well as the potential for high fees charged by local issuers, could dampen demand for the products.
While the approval of spot crypto ETFs in Hong Kong is a positive development for the city’s ambitions to become a digital assets hub, Balchunas believes that the market may struggle to attract significant inflows without the participation of larger players. He also highlights the importance of competitive fees, with US ETF providers offering lower fees compared to what may be charged in Hong Kong.
On the other hand, Balchunas suggests that the Hong Kong spot Bitcoin ETF market could see growth if bigger players enter the market and mainland Chinese investors gain access to the product. Additionally, Hong Kong’s approval of a spot Ethereum ETF could give it an edge over the US, which has yet to approve a similar product tracking the price of Ether.
While the US Securities and Exchange Commission has delayed decisions on spot Ethereum ETF applications from major players like BlackRock and Fidelity, some analysts believe that approval may not come until 2024. Despite the challenges facing the Hong Kong ETF market, the approval of spot Bitcoin and Ethereum ETFs signals a growing interest in digital assets in the region.
