Crypto News- Hong Kong’s Ether, Bitcoin ETFs: Three newly approved spot Bitcoin (BTC) and Ether (ETH) exchange-traded funds (ETFs) in Hong Kong are causing a stir, but according to senior Bloomberg ETF analyst Eric Balchunas, they might not be as groundbreaking as some believe.
Analysts War n: Hong Kong’s Ether, Bitcoin ETFs Might Settle Below 500 Million Dollars Threshold
On April 15, the Hong Kong Securities and Futures Commission (SFC) gave conditional approvals to three offshore Chinese asset managers—Harvest Fund Management, Bosera Asset Management, and China Asset Management—to begin issuing spot Bitcoin and Ether ETFs.
Tempering Expectations for Hong Kong’s Newly Approved Bitcoin and Ether ETFs
Despite the excitement surrounding these approvals, Balchunas poured cold water on overly optimistic predictions, suggesting that the ETFs might struggle to attract significant investment. He dismissed notions of a potential $25 billion influx, stating, “We think they’ll be lucky to get $500 million.”
Challenges Ahead: Skepticism Surrounding Hong Kong’s Bitcoin and Ether ETFs
Balchunas cited several reasons for his skepticism. Firstly, he highlighted the relatively small size of the Hong Kong ETF market compared to major players like the United States. He also noted that Chinese retail investors do not have official access to these products, limiting their potential reach.
Furthermore, Balchunas pointed out that the approved asset managers are comparatively small players in the global market, dwarfed by industry giants like BlackRock. He emphasized that the U.S. alone has spot Bitcoin ETFs with more assets than the entire Hong Kong ETF market.
Navigating Market Inefficiencies: Balchunas’ Concerns About Hong Kong’s Capital Environment
In terms of the operating environment, Balchunas suggested that the capital market in Hong Kong is less efficient than in other jurisdictions, leading to wider spreads and potentially higher fees. This, he argued, could deter investors accustomed to the low-cost environment of U.S. ETFs.
While some analysts, like Jamie Coutts, see the Hong Kong ETFs as opening up a significant opportunity for Chinese investors, Balchunas remains cautious about their potential impact. He believes that while the addition of ETFs in other countries is positive, it pales in comparison to the scale of the U.S. market.
Innovative Creation Models: Contrasting Approaches in Hong Kong and the U.S. Bitcoin ETF Markets
One notable aspect of the approved ETFs is their use of an in-kind creation model, allowing new shares to be issued directly using Bitcoin and Ether. This model differs from the cash-create redemption model used by U.S. spot Bitcoin ETFs, which the SEC has expressed concerns about regarding potential money laundering and fraud.
Despite differing opinions, the approved spot ETFs are set to launch in approximately two weeks, offering investors a new opportunity to gain exposure to Bitcoin and Ether through regulated investment vehicles.
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