The recent approval of spot Bitcoin and Ethereum exchange-traded fund applications in Hong Kong has raised hopes for the growth of the local ETF market. However, Bloomberg ETF analyst Eric Balchunas has expressed concerns about the market’s performance compared to the United States. Balchunas predicts that the Hong Kong ETF market may not attract as much investment as its US counterpart due to the absence of major players and the possibility of high fees.
The Hong Kong Securities and Futures Commission (SFC) granted in-principle approval for spot Bitcoin and Ethereum ETF products from China Asset Management, Harvest Global Investments, and Bosera Asset Management in partnership with HashKey Capital. While this is a significant milestone for Hong Kong as it aims to establish itself as a central digital assets hub, there are doubts about the level of inflows the market will witness.
Eric Balchunas’s tweet estimating a possible inflow of $500 million contrasts with another prediction of $25 billion. The absence of major players in the Hong Kong ETF market and the potential for high fees from issuers could discourage demand for the products. In comparison, the US ETF market benefits from the presence of financial giants like BlackRock and Fidelity, which offer lower fees of 0.25% and below.
The competitive landscape in the ETF market plays a crucial role in attracting investors. With US ETF providers offering lower fees, the speculated one to two percent fee for Hong Kong Bitcoin ETFs could be uncompetitive. Grayscale’s management fee of 1.5% for its spot Bitcoin ETF is higher than its rivals and has resulted in continuous outflows, unlike BlackRock, which continues to see gains.
The possibility of larger players entering the Hong Kong spot Bitcoin ETF market and mainland Chinese investors gaining access to the product could boost its growth. Despite the US having a larger market for spot Bitcoin ETFs, Hong Kong might have an advantage as one of the first jurisdictions to approve a spot Ethereum ETF.
While the US SEC has approved numerous spot Bitcoin ETF applications, the approval for a spot Ethereum ETF remains uncertain. Applicants like BlackRock and Fidelity have faced delays in their filings, leading to speculation that the approval may not happen in 2024. This uncertainty poses challenges for the growth of the spot Ethereum ETF market in the United States.
While Hong Kong has made significant progress in approving spot Bitcoin and Ethereum ETF products, challenges such as the absence of major players and high fees could hinder the market’s growth. On the other hand, the US market faces uncertainties regarding the approval of a spot Ethereum ETF. Both markets need to address these challenges to attract more investors and realize their full potential in the realm of digital assets.
Leave a Reply