Bitcoin and Ethereum ETFs Are Live In Hong Kong, Will They Meet Expectations?

Hong Kong investors can now rejoice as the inaugural set of ETFs, focusing on Bitcoin and Ethereum, commenced trading in the region today. There’s optimism that these offerings might surpass the $125 million US Bitcoin ETF launch. The level of demand for these funds will be closely watched as a gauge of the city’s progress in establishing a well-regulated digital asset hub.

This development has propelled the Bitcoin price up by 2%, with the current trading value hovering around $63,700 at the time of this report.

Hong Kong Bitcoin ETFs Go Live

Harvest Global Investments Ltd., the local branch of China Asset Management, along with a collaboration between HashKey Capital Ltd. and Bosera Asset Management (International) Co., have introduced Bitcoin and Ether ETFs in the city.

Rebecca Sin of Bloomberg Intelligence estimates that Hong Kong’s Bitcoin and Ether funds could accumulate $1 billion over a two-year period. However, Harvest Global’s CEO, Han Tongli, believes this projection is too conservative. He points out that financial products and services in Hong Kong are embraced by investors both in the West and the East, unlike the U.S., which primarily caters to Western investors.

Potential sources of inflows for the Hong Kong offerings include Chinese wealth held in the city, as well as activity from crypto exchanges and market makers in the Asia Pacific region. While the US Bitcoin ETFs have a single cash redemption model, the Hong Kong Bitcoin ETFs undertake a unique redemption mechanism, allowing the swapping of the underlying assets for fund units and vice versa.

Expanding Crypto ETFs Offering

The Hong Kong stock exchange has signaled its openness to a broader range of cryptocurrency exchange-traded funds (ETFs) as the city’s initial spot Bitcoin and Ether products become available. In an interview with Bloomberg, Brian Roberts, head of equities product development at Hong Kong Exchanges and Clearing Ltd., said:

“We can continue to go into the physical spot asset, maybe composite types of products, eventually getting into maybe levered and inverse types of strategies”.

According to Roberts, the first priority is to observe the progress and growth of the recent launches before considering additional opportunities in the future.

In response to inquiries about the potential inclusion of the new spot ETFs in a program permitting mainland Chinese investors to buy certain products in Hong Kong, Roberts stated that such a possibility could be explored in the future.