Recently, Hong Kong regulators approved spot Bitcoin and Ethereum exchange-traded fund applications, marking a major milestone for the city’s growing digital assets market. However, despite this positive development, there are concerns about the potential performance of the local ETF market compared to the United States.
According to Bloomberg ETF analyst Eric Balchunas, the Hong Kong Bitcoin and Ether ETF market may see inflows of around $500 million. While this is a significant amount, it pales in comparison to the over $15 billion in inflows from BlackRock’s spot Bitcoin ETF alone in the US. Balchunas attributes this difference to the absence of major players in the Hong Kong market and the possibility of high fees charged by local issuers.
One of the main challenges highlighted by Balchunas is the lack of major players in the Hong Kong ETF market. In contrast, the US market boasts financial giants such as BlackRock and Fidelity, which have significantly more assets under management. This disparity in size could hinder the growth and demand for Bitcoin and Ethereum ETFs in Hong Kong.
Another issue raised by Balchunas is the potential for high fees in the Hong Kong ETF market. While US ETF providers offer fees as low as 0.25%, Balchunas speculates that Hong Kong issuers may charge fees ranging from one to two percent. This could make the products uncompetitive and less appealing to investors, especially when compared to lower fee options available in the US market.
Despite the challenges faced by the Hong Kong ETF market, there is still potential for growth. Balchunas believes that the market could see an uptick if bigger players enter the scene and mainland Chinese investors are granted access to the products. Additionally, being one of the first jurisdictions to approve a spot Ethereum ETF, Hong Kong may have an edge over the US in this aspect.
While the approval of spot Bitcoin and Ethereum ETFs in Hong Kong is a positive development for the city’s digital assets market, there are challenges that need to be addressed for the market to reach its full potential. Factors such as the lack of major players, high fees, and the need for increased investor access could impact the growth and success of Bitcoin and Ethereum ETFs in Hong Kong. However, with the right strategies and regulatory support, the market could see significant growth and become a key player in the global digital assets landscape.