Hong Kong’s Incoming Spot Bitcoin ETFs Could Be ‘Big Deal.’ Here’s What Analysts Say

Instead, these vehicles might serve as an alternative investment option for Chinese investors seeking new ways to protect their assets beyond gold, real estate, and international stocks.

Read more: Hong Kong Said Likely to Approve Spot Bitcoin ETFs Next Week

Noelle Acheson, a macro analyst and writer of the Crypto Is Macro Now newsletter, commented via email to CoinDesk, “[They] will have significant impact.” The reason isn’t only due to reaching out to hedge funds and family offices in the region; it’s also about the opportunity it provides for mainland investors.

Chinese investors are hesitant to put their money into domestic real estate and stocks due to the known issues in China’s housing market, construction industry, and stock exchanges. Instead, they have turned their attention to alternative investments such as gold. Acheson noted that recently, trading in a gold-linked ETF in China had to be suspended because its price difference reached 30% as investors rapidly bought gold at record prices.

Just like with Bitcoin, Acheson noted, there might be a substantial influx of money. This notion gains more weight if fears of additional depreciation of the yuan intensify.

It’s likely that Chinese officials recognize that many of their people will be investing in tangible assets, regardless of approval, and they might prefer if those assets were tied to economies outside of the United States.

Markus Thielen, founder of 10x Research in Singapore, stated that ETFs could increase the likelihood of a Chinese retail buying rush reminiscent of the 2013 stock market boom. The hype around Bitcoin in China reached new heights that year, pushing its price up from $10 in January to over $1,000 by the end. However, this surge came to an end when the Chinese government forbade financial institutions from trading the asset in December.

Approximately 7 out of 10 Chinese citizens own real estate. With the recent decline in both the property and stock markets, there aren’t many other options left, according to Thielen. Bitcoin serves as one possible alternative.

According to Vetle Lunde, senior analyst at K33 Research, while the approval of Exchange-Traded Funds (ETFs) could bring more positivity to bitcoin, it is important to note that the inflows may not reach the significant levels experienced by U.S. spot funds.

The two Bitcoin ETFs listed in Hong Kong, which focus on future contracts, have experienced significant growth this year, increasing their holdings in Bitcoin value by over 100%. However, their total size is currently below 2,000 Bitcoins, representing only a tiny fraction (around 2%) of the assets held by their counterparts listed in the United States.

In Lunde’s view, the relatively smaller size of Hong Kong futures ETFs compared to those in the United States indicates that investor inflows into Hong Kong ETFs are likely to be more modest.