Hong Kong Bitcoin ETF Archives

HK Bitcoin ETF Market Poised For Record-Breaking Debut

Zhu Haokang, the Digital Asset Management Supervisor and Family Wealth Supervisor at Warsaw Fund expressed great confidence in the trading volume of Hong Kong Bitcoin ETFs on its inaugural day.

This volume exceeded the scale achieved during the US launch on January 10th of this year, which amounted to over 125 million US dollars.

Haokang further stated that Huaxia, one of the three ETF issuers, is confident in becoming the largest ETF issuer on the first day of trading. At the same time, OSL, a digital asset platform, has already completed the initial fundraising with two funds, including Huaxia.

Furthermore, the capital inflow during the Hong Kong spot Bitcoin ETF’s first-day listing transaction has surpassed that of the US spot ETF market.

According to Haokang, this difference can be attributed to two factors: the purchase and redemption of spot and in-kind transactions, which are unavailable in the US spot Bitcoin ETF.

Unprecedented Investment Options

One unique aspect of the China Summer Fund’s Hong Kong spot ETF is its incorporation of Hong Kong dollars, US dollars, and dual counter offers (RMB counters), distinguishing it from the other two offerings.

Additionally, the fund features a non-listed share alongside the listed share, further setting it apart from its counterparts. Given the physical purchase method, investors, including Bitcoin miners, can directly acquire the Hong Kong virtual asset spot ETF using the Bitcoin they already hold.

Moreover, outreach efforts have reportedly been made to attract investors from countries and regions without ETF offerings, such as Singapore and the Middle East, generating significant interest.

Despite the substantial market size of the current US spot Bitcoin ETF market, Hong Kong’s utilization of cash and in-kind subscriptions, coupled with the appeal of open trading during Asian market hours, is expected to attract numerous American investors, according to Haokang.

Mainland Chinese Investors Restricted

Wayne Huang, OSL ETF and Trusteeship Business Manager, highlighted that Victory Securities could facilitate physical purchases, and the winning securities in China can also leverage OSL’s support.

Three vouchers enable physical purchases, with more expected to follow suit. Following the ETF’s listing, various voucher chambers of commerce are likely to participate, increasing the overall ecosystem of the Bitcoin ETF market in May.

On the other hand, Zhu Haokang also clarified that mainland Chinese investors are currently restricted from investing in Hong Kong’s spot ETF market. However, qualified investors, institutional investors, retail investors, and qualified international investors in Hong Kong can participate in the spot ETF race.

Individuals seeking further details are advised to consult voucher providers and sales channels while closely monitoring potential regulatory adjustments and the development of a specific regulatory framework in the future.

Currently, BTC is trading at $63,000 after failing to consolidate above the key $66,000 level in recent days. However, the launch of the ETF market in Hong Kong is expected to significantly impact the price of BTC in the long run.

Featured image from Shutterstock, chart from TradingView.com

In a recent analysis, Stanislas Bernard, the founder of Sinz 21st.Capital, delved into the complexities surrounding Hong Kong’s consideration to approve spot Bitcoin ETFs against the backdrop of China’s escalating economic crisis. With the nation grappling with a record debt-to-GDP ratio of 288% in 2023, and witnessing one of the most severe housing market collapses in three decades, the financial instability has triggered an unprecedented capital flight towards overseas markets.

The Perfect Timing For A Spot Bitcoin ETF?

Amidst these turbulent economic times, Hong Kong’s potential approval of spot Bitcoin ETFs stands out as a pivotal development that could not only be a safe haven for Chinese investors but also significantly influence Bitcoin’s valuation, potentially catapulting it to the elusive $100,000 mark.

China’s economic woes have been intensifying, marked by a towering debt ratio and a plummeting housing sector that has investors scrambling for alternatives. “China currently faces a significant economic downturn, exacerbated by soaring debt and malinvestments in real estate. The crisis, becoming well-known in 2021 with the default of Evergrande Group, has now spread, causing a ripple effect that will likely slow down the Chinese economy for years to come,” Bernard pointed out.

This backdrop of economic instability has incited a significant shift in investor behavior, notably among Chinese investors who, faced with stringent capital controls, have sought refuge in ETFs that offer exposure to foreign markets. Yet, this avenue has been fraught with its own challenges.

“Investors are paying premiums as high as 43% on certain US-focused ETFs due to quota limitations, which speaks volumes about the desperation to find safer investment harbors,” Bernard notes. Such premiums underscore the pervasive fear and uncertainty that have gripped the Chinese market, driving investors towards seemingly any available exit from the volatility of the domestic market.

The Role Of Hong Kong

Bernard believes that not only Hong Kongers but also Chinese mainlanders will flock to Bitcoin ETFs. “They are pretty integrated. Mainland is HK’s largest trading partner. Would not be possible to approve a spot ETF and then close it to mainland. They will enforce transaction limits instead,” the expert said.

In the midst of these developments, Hong Kong’ Securities and Futures Commission (SFC) is reportedly considering the approval of spot Bitcoin ETFs already by the end of April, as reported yesterday. This move is viewed as a strategic effort to capture a portion of the capital flowing into Bitcoin, especially in the wake of the SEC’s approval of similar ETFs in the US, which saw a meteoric rise with $12 billion of net flow.

“Hong Kong is scrambling for a change. The approval of spot Bitcoin ETFs could unlock a vast reservoir of stranded Chinese capital into Bitcoin, providing a much-needed life raft for investors,” Bernard explained.
The anticipated approval of spot Bitcoin ETFs by Hong Kong authorities has been met with significant enthusiasm within the crypto community. Influential figures such as Bitcoin Munger and Stack Hodler have been vocal about the potential impact of this development on Bitcoin’s price.

“Hong Kong ETFs approval have accelerated to next week. Most accounts on CT weren’t making a big deal about them, but they are a big deal. They are going to take us to $100k+ in due time. Tick tock!” stated popular Bitcoin analyst Bitcoin Munger (@bitcoinmunger). He refers to the regional yearly year-over-year supply change from West to East.

regional yearly year-over-year supply change

Stack Hodler (@stackhodler) further emphasized the urgency among Chinese investors to find secure investment avenues outside the traditional system, “Chinese investors were panic-buying a Gold fund at a 30% premium this month as they attempt to get their wealth into something outside the Chinese system. The approval of Hong Kong spot ETFs could be the turning point, offering a sanctioned avenue for wealth preservation amidst the crumbling real estate market.”

Overall, the potential approval of spot Bitcoin ETFs in Hong Kong is poised to be a landmark development, not just for the region but for the global market. By offering a secure and regulated channel for investment, it could serve as a catalyst for significant capital inflow into Bitcoin, reinforcing its status as a viable store of value.

“As we stand at the cusp of this historic development, the implications for Bitcoin and the broader cryptocurrency market could be profound. The approval of spot Bitcoin ETFs in Hong Kong could indeed be the harbinger of a new era, potentially driving Bitcoin’s value to new heights,” concluded Bernard.

At press time, BTC traded at $70,945.

Bitcoin price