Hong Kong authorities have given the green light to Bitcoin and Ethereum spot exchange-traded fund (ETF) proposals. However, Bloomberg ETF expert Eric Balchunas anticipates that the Hong Kong ETF sector might underperform in comparison to the US market. This could be due to a current absence of major market participants and potential high fees.
Based on Balchunas’ analysis, the Bitcoin and Ether ETF market in Hong Kong could attract around half a billion dollars in investments. However, this is relatively small compared to the over $15 billion that BlackRock’s spot Bitcoin ETF has brought in from US investors alone.
Hong Kong Spot BTC ETF Smaller than the US
On April 15, the Hong Kong Securities and Futures Commission (SFC) gave its preliminary green light to Bitcoin and Ethereum spot ETF proposals from China Asset Management, Harvest Global Investments, and Bosera Asset Management, in collaboration with HashKey Capital.
The approval of spot crypto trading in Hong Kong represents a significant advancement for the city’s goal of becoming a leading digital asset hub. However, some believe that Hong Kong might not experience the same volume of inflows as seen in the US market.
According to Eric Balchunas, an ETF analyst at Bloomberg, he speculated in a tweet that the Hong Kong ETF market might attract approximately half a billion dollars ($500M), contrasting with another forecast suggesting a potential inflow of twenty-five billion dollars ($25B).
Based on Balchunas’ analysis, several elements may dampen the interest in Hong Kong ETFs. These include the lack of prominent investors in this market and the potential for issuers to levy high fees.
ETF experts noted that prospective local issuers are much smaller than the colossal US players. The US is home to financial titans like BlackRock, the biggest asset manager globally, and Fidelity, with almost $5 trillion in assets under management (AUM).
Based on fees, Balchunas’ estimation suggests that one to two percent could be less attractive for Bitcoin ETF issuers in Hong Kong, as US providers typically charge 0.25% or less.
Previously, CryptoPotato announced that Grayscale, with a 1.5% management fee for its Bitcoin spot ETF, indicated a potential decrease as the ETF market matured.
The management fee charged by our company is noticeably greater than that of its competitors, resulting in consistent losses contrasted to firms like BlackRock, which persistently register profits.
When Spot Ethereum ETF in the United States?
During this time, there could be an increase in activity for Bitcoin ETFs traded in Hong Kong if larger investors join and Chinese mainlanders are granted permission to invest in these products, as suggested by Balchunas.
While the US market for spot Bitcoin ETFs is bigger than Hong Kong’s, Hong Kong holds an advantage due to being among the initial regulatory approvers for a spot Ethereum ETF.
After approving around a dozen applications involving other assets in January 2024, the US Securities and Exchange Commission appears hesitant to grant approval for a comparable product that monitors the value of Ether, the second largest cryptocurrency by market cap.
Some notable firms, including BlackRock, Grayscale, Frank Templeton, Fidelity, and Invesco, have applied for a place to launch an Ether Exchange-Traded Fund (ETF) in the US. The regulatory body in America has postponed its ruling on Ether ETF applications from BlackRock and Fidelity following previous deferrals of other proposals.
Yet, certain financial experts hold the view that the Securities and Exchange Commission (SEC) in the US might not give its approval for a Spot Ethereum ETF by the year 2024.
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2024-04-17 01:10