Key Points
- Three Bitcoin and Ether exchange-traded funds (ETFs) recently received conditional approval in Hong Kong.
- Despite the approval, Bloomberg ETF analyst Eric Balchunas suggests the impact may be less significant than expected.
On April 15, the Hong Kong Securities and Futures Commission (SFC) gave conditional approval to three offshore Chinese asset managers for the issuance of spot Bitcoin (BTC) and Ether (ETH) ETFs.
These asset managers include Harvest Fund Management, Bosera Asset Management, and China Asset Management.
Analyst’s Predictions
Eric Balchunas, a senior ETF analyst at Bloomberg, however, has downplayed the potential impact of these ETFs. He dismissed predictions of $25 billion inflows into these ETFs, stating they’d be lucky to attract $500 million.
Balchunas justified his predictions by pointing out that the Hong Kong ETF market is considerably smaller compared to markets like the United States. He also noted that these ETFs do not provide Chinese retail investors with official access to the products.
Comparisons and Challenges
In comparison, Balchunas highlighted that the three prospective ETF issuers are relatively small compared to asset management giants like BlackRock, which manages more than $9 trillion in assets.
He also pointed out that the capital environment for these funds is less efficient than elsewhere, and fees are likely to be set around the 1-2% mark. This is significantly higher than the low fees in the U.S. market.
Jamie Coutts, chief crypto analyst at Real Vision, however, believes that despite the size of the Hong Kong ETF market, these products could open up a significant pool of capital for Chinese investors.
The Hong Kong FSC approved the spot Bitcoin and Ether ETFs to be launched using an in-kind model. This model allows new ETF shares to be issued directly using Bitcoin and Ether, contrasting with the cash-create redemption model used by U.S. spot Bitcoin ETFs.
The spot ETFs are expected to launch in approximately two weeks.