Hong Kong Bitcoin ETFs Offer These Advantages Over The US ETFs

After a long wait, the Hong Kong Bitcoin ETFs have finally gone live for trading setting up high expectations among investors. Interestingly, the launch of the Hong Kong Bitcoin ETFs comes at a time when the US Bitcoin ETFs are experiencing net outflows over the last week. Market analysts have started pointing out why one should see Hong Kong Bitcoin ETFs separately from the US products and the advantages that they bring along with them.

Key Points of Hong Kong Bitcoin ETFs

Hong Kong has embraced an in-kind ETF subscription and redemption mechanism, enabling the exchange of underlying assets for fund units and vice versa. In contrast, the US Bitcoin funds utilize a cash redemption model.

In a recent statement, Blockstream CEO Adam Back turned the spotlight on Hong Kong’s Bitcoin ETF market, set to open in just three hours. Noting the unique feature of in-kind entry and exit, which involves depositing Bitcoin to avoid artificial capital gains tax implications, Back highlights the significance of this development in expanding market accessibility and bridging time zone gaps for a more continuous spot market environment.

He expressed curiosity about the incoming capital flows and emphasized differences from counterparts like GBTC. Thus, Adam Back anticipates a distinct market landscape without the specter of bankruptcy-related selling in Hong Kong.

Hong Kong #bitcoin ETFs market open in 3hours. in kind entry and exit (deposit Bitcoin) so no artificial capital gains tax hit. Another timezone and market to get a bit closer to 24×7 spot market. Let's see how the inflows go. No $GBTC analog, no bankruptcy selling in HKG.

— Adam Back (@adam3us) April 29, 2024

On the other hand, analysts have been predicting minuscule inflows for HK Bitcoin funds in comparison to the U.S. Bitcoin ETFs. According to Bloomberg Intelligence’s Rebecca Sin, Bitcoin and Ether funds in Hong Kong could accumulate $1 billion over the span of two years.

However, Han Tongli, CEO of Harvest Global, considers this estimate “too conservative.” Tongli attributes this to the broad acceptance of financial products and services in Hong Kong, appealing to investors from both the Western and Eastern markets. In contrast, he notes that the US primarily serves Western investors.

On the other hand, outflows from US spot Bitcoin ETFs have continued. The total outflows on Monday, April 29, stood at $51 million, as per data from Farside Investors.

Chinese Funds Coming to Hong Kong?

Gabor Gurbacs, the Director of Digital Assets strategy at VanEck said: “As I said many times, the East-West Bitcoin ETF competition is heating up. Hong Kong wouldn’t launch Bitcoin ETFs without China’s approval. China is determined to put up competition on institutional Bitcoin capabilities. Full nation-state adoption game theory in effect. Game on!”

Gurbacs noted that it will be intriguing to observe the various agreements China ventures into. His speculation suggests that their interests likely extend far beyond ETFs, possibly encompassing private technology, market infrastructure, spot Bitcoin, among other areas. The introduction of the Hong Kong ETF serves not only as a legitimizing tool but also as a signal indicating that involvement within the conventional framework is permissible.