Hong Kong’s Securities and Futures Commission (SFC) announced the issuance of conditional approvals to three asset managers to begin issuing spot Bitcoin and Ethereum exchange-traded funds (ETFs). However, Bloomberg ETF analyst Eric Balchunas has played down the excitement surrounding the recent approval of the spot BTC and ETH ETFs in Hong Kong.
Bloomberg analyst discusses the Hong Kong ETF market
According to Bloomberg analyst, the recent approval may not be as big of a deal as people are making it out to seem. In one of his recent posts on microblogging platform X, he discussed the idea flying around that the ETFs could enjoy about $25 billion in inflows. He also mentioned four reasons why crypto investors would want to limit what they are expecting from the recently approved investment vehicles.
He noted that he saw an estimation saying the ETFs could see $25 billion inflows but he thinks the case is otherwise. In his opinion, Balchunas said that the funds would be lucky to get $500 million in inflows.
Explaining the reasons behind his prediction, he noted that the ETF market is very small in Hong Kong compared to the United States. Balchunas also opined that the ETFs will not allow regular retail investors in China to access the products.
Limitations and challenges in the Hong Kong ETF market
The Bloomberg analyst explained that the Hong Kong ETF firms are smaller than the asset management firms in the United States. He cited BlackRock as an example, with the firm boasting about $10 trillion in assets under management. He explained that the United States spot Bitcoin ETFs boasts more assets than the entire Hong Kong ETF market.
The analyst also discussed the fees, noting that they would likely be set around the 1-2% mark compared to the US the charges are cheaper. Balchunas explained that the ecosystem in Hong Kong is fairly liquid, which will lead to the ETFs seeing wide spreads and premium discounts. In his takeaway, he pointed out that other countries cannot be compared to the United States market.
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