The launch of Bitcoin ETFs in Hong Kong faced its first hurdle on April 30, with the China Asset Management Bitcoin ETF experiencing its first cumulative daily outflows on Monday. Farside data revealed that the China AMC Bitcoin ETF saw an outflow of $4.9 million, while the other Hong Kong-based products remained steady with no flows.
Despite a promising start, the three Hong Kong Bitcoin ETFs managed to amass $262 million in assets under management (AUM) within their first week. However, the total asset inflows for both Bitcoin and Ethereum ETFs in Hong Kong were less than impressive at less than $14 million during the initial launch week. This figure is significantly lower when compared to the billions of dollars that flowed into U.S. spot Bitcoin ETFs earlier this year.
Senior Bloomberg ETF analyst, Eric Balchunas, cautioned investors not to expect the same level of activity in Hong Kong as seen in the U.S. market. Balchunas pointed out that the $310 million AUM of Hong Kong ETFs is equivalent to $50 billion in the U.S. market, making them substantial players in their local market. The relatively small size of the Hong Kong equities sector, with a market cap of $4.5 trillion compared to the $50 trillion worth of U.S. listed equities, may also impact the performance of Bitcoin ETFs in the region.
The Hong Kong equities sector faces liquidity challenges due to slower economic growth in mainland China since 2022. This slower growth could hinder the performance of Bitcoin and Ethereum ETFs in Hong Kong, especially with restrictions that limit mainland Chinese investors’ access to these assets unless they also hold Hong Kong residency. As a result, lower transaction volumes for the ETFs are anticipated in Hong Kong compared to the United States.
Despite the challenges, a recent study by crypto exchange OSL found that nearly 80% of crypto-savvy investors in Hong Kong are interested in investing in the new spot Bitcoin and Ethereum ETFs. This heightened interest comes as Bitcoin experienced a weekend surge, reaching close to $64,000 from below $57,000 the previous week. The excitement among investors in Hong Kong signals a growing appetite for ETF products despite the initial setbacks.
While the launch of Bitcoin ETFs in Hong Kong faced some challenges initially, there is still significant interest among investors in the region. The performance of these ETFs in Hong Kong may not match that of the U.S. market, but they play a vital role in the local financial landscape. As the market continues to evolve and regulations adapt, the future of Bitcoin and Ethereum ETFs in Hong Kong remains an intriguing area to watch.
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