The initial excitement surrounding Hong Kong Crypto ETFs debut quickly faded, causing a significant outflow of funds. Bloomberg data shows that six Bitcoin and Ether exchange-traded funds (ETFs) had investor outflows, resulting in a $25 million decline in inflows from $293 million at launch.
In contrast to the spot ETFs established in the United States on January 10, the performance of these ETFs located in Hong Kong has been underwhelming. With a combined value of $55 billion, these US-based ETFs have seen record-breaking net inflows of $12.1 billion.
Hong Kong ETF Market Challenges
Although Hong Kong may not seem like much, keep in mind that its trading industry is far smaller when compared to the United States. By attracting more digital asset exchange licenses, the government is hoping that these crypto ETFs would increase trading volume and entice market makers.
To become a crypto hub, Hong Kong must compete with Dubai and Singapore. The city’s reputation as a vibrant financial hub will be rebuilt through this change, particularly in light of its recent defamation due to its crackdown on opposition. Despite banning cryptocurrency trade in the region, it appears that the Beijing authorities are unconcerned with this shift in focus.
Launches in Hong Kong Crypto ETFs have been, to put it mildly, lackluster, according to Le Shi, head of trading at market-making and algorithmic trading firm Auros. This, he says, is due to two main causes:
Bitcoin and Ether exchange-traded funds (ETFs) were introduced in Hong Kong on April 30 by Harvest Global Investments, the local branch of China Asset Management, in conjunction with a consortium consisting of HashKey Capital and Bosera Asset Management (International). It is worth mentioning that these funds are not currently included in a program that grants mainland Chinese investors access to specific crypto ETFs based in Hong Kong. The future of this program’s inclusion of these funds is uncertain.
Crypto ETFs Show Early Promise
An analysis by Bloomberg Intelligence ETF specialist Rebecca Sin finds several silver linings despite the early problems. The fact that the overall assets are more than $250 million is encouraging. Sin predicts that as the ecosystem develops, additional issuers will enter the market, and that the ETFs will accumulate $1 billion in the following two years.
On March 14, the main cryptocurrency, Bitcoin, reached a new record high of $73,750, because to the frenzy around US Bitcoin ETFs. According to CoinMarketCap, the price of bitcoin has dropped 10% from its recent all-time high and is now trading at $66,240. These crypto ETFs might see a resurgence in investment if the 2023 crypto bull run were to materialize again.
Time will tell if Hong Kong Crypto ETFs can overcome its rocky start and become a major participant in the global digital asset market, even though the short-term prospects for the city’s crypto goals may appear bleak.
