Hong Kong regulators recently approved applications for Spot Bitcoin and Ethereum exchange-traded funds, but Bloomberg ETF analyst Eric Balciunas said the current lack of large players and the potential for high fees could make local We predict that the ETF market may not perform as well as the US.
Balchunas said Hong Kong's Bitcoin-Ether ETF market could generate $500 million in inflows, but that's dwarfed by the more than $15 billion from BlackRock's spot Bitcoin ETF product alone in the U.S. .
Hong Kong Spot BTC ETF is smaller than US
On April 15, the Hong Kong Securities and Futures Commission (SFC) issued a statement regarding Vocera Asset Management's Spot Bitcoin and Ethereum ETF products in partnership with China Asset Management, Harvest Global Investments, and Hashkey Capital. Approval was granted in principle.
The spot approval of cryptocurrencies is a major milestone for Hong Kong, which is determined to position itself as a central hub for digital assets, but some say the city-state may not see the large inflows seen in the United States. There is some speculation.
Eric Balchunas, Bloomberg ETF Analyst: Tweetpredicted that the Hong Kong ETF market would see inflows of $500 million, and discussed another forecast estimating $25 billion.
Balchunas said key factors could hinder demand for the product, including the lack of a major player in the Hong Kong ETF market and the potential for these issuers to charge high fees.
ETF analysts added that the potential domestic issuers are small compared to the US giants. The United States is home to financial giants such as BlackRock, the world's largest asset management company, and Fidelity, which boasts nearly $5 trillion in assets under management (AUM).
In terms of fees, the 1% to 2% Balciunas estimates could prove uncompetitive for Hong Kong Bitcoin ETF issuers, with U.S. ETF providers offering 0.25% or less.
As previously reported, crypto potatoGrayscale currently charges a 1.5% management fee for its Bitcoin Spot ETF, which it said will be lowered over time as the ETF market matures.
The company's management fees are significantly higher than its competitors, and it continues to see capital outflows compared to competitors such as BlackRock, which continues to record profits.
When will Ethereum ETFs become popular in the US?
Meanwhile, Balchunas said Hong Kong's spot Bitcoin ETF market could rise if major players get involved and mainland Chinese investors are allowed access to the product.
The US Spot Bitcoin ETF market is larger than Hong Kong, but Hong Kong may have an advantage over the US as it was one of the first jurisdictions to approve Spot Ethereum ETFs.
Since greenlighting about a dozen applications in January 2024, the U.S. Securities and Exchange Commission has been reluctant to approve similar products to track the price of Ether, the second-largest cryptocurrency by market capitalization. It seems like there is.
BlackRock, Grayscale, Frank Templeton, Fidelity, and Invesco are among the applicants for SpotEther ETFs. US regulators recently delayed a decision on Ethereum applications from BlackRock and Fidelity, following delays in other applications.
However, some analysts believe that SEC approval of Spot Ethereum ETFs in the US may not materialize until 2024.
