The Ethereum and Bitcoin spot ETFs issued and approved within Hong Kong are yet to amass the popularity and traction of their American contemporaries.
It is important to note that in January, the Securities and Exchange Commission of the United States issued a series of Bitcoin spot ETFs that led to massive inflows and investment interest from the local TradeFi sector.
Crypto ETFs Collected Only $22.5 Million in Capital Inflows
However, the report suggests that the same products issued by the local firms operating out of Hong Kong are yet to cross the same threshold. The article noticed that the crypto ETFs have only collected $22.5 million in capital inflows for the first week of launch.
The data projections provided by Farside Investors indicated the three Bitcoin ETFs launched on 30th April in the East Asian region gathered around $262 million in AUM.
Out of this total value invested in the investment vehicles majority of inflows were added before the listing. On the other hand, the total inflows for the first week of the listing were valued at $14 million which were dwarfed in comparison to the billions of dollars of investments added to US-issued Bitcoin ETFs in the first month of 2024.
Analysts of Farside claimed that Bitcoin and Ethereum ETFs in Hong Kong did not acquire the same significance as in the case of US-issued ETFs.
Crypto ETFs Failed to Meet Investment Expectations
The Ethereum ETFs issued in Hong Kong, classified as the first of their kind in the world, were unable to show an impressive streak.
Thus far, the investment products have gathered $54.2 million in AUM and only $9.3 million in the form of cumulative inflows as of 6th May 2024. The cryptocurrency ETFs issued in Hong Kong were viewed an improvement after the issuance of US-based ETFs.
These Hong Kong-issued products are denominated in three fiat currencies and comprise of in-kind transfers that allow investors to purchase and redeem ETF shares directly using Bitcoin or Ethereum.
Eric Balchunas an analyst working for Bloomberg noticed that there were no projections of big numbers generated from the Hong Kong counterparts. However, the East Asian ETFs that collected $310 million can be equaled to the $50 billion generated by American ETFs.
The analysts noted that in terms of local market scale, the former shows a big enough investment impact. Hong Kong share market is relatively smaller with a total market cap of $4.5 trillion whereas the same sector in America stands at $50 trillion in terms of total equities generated across US exchanges.
The Hong Kong equity is also more illiquid on account of slower economic growth in mainland China since 2022.
Hong Kong-based Investors Prefer Local Spot Bitcoin and Ethereum ETFs
OSL exchange published a recent study that indicated that cryptocurrency investors in Hong Kong showed a preference for investing in spot Bitcoin and Ethereum ETFs as much as 80%. However, the accessibility of the newly issued investment products is fairly limited for access to investors operating out of mainland China.
Investors who hold a Hong Kong residency may only access the ETFs. The researchers at SoSoValue noted that Mainland Chinese investors have legal restrictions against purchasing the ETF shares.
At the same time, the amount of incremental funds is restricted which has led to lower trading volumes. The researchers further noted that Hong Kong crypto ETFs have limited accessibility on account of qualification.
On this account, the investors hailing from mainland China are unable to participate in the transactions. In the case of Futu Securities is one such example, where investors with a mainland Chinese and US residency may not apply.
Therefore, the only way for mainland inflows is through southbound Stock Connect of Hong Kong. However, this channel is also banned and there are no signs or expectations of its reactivation anytime soon.
The researchers further noted that after the first teaser fee period, the management fees for Hong Kong crypto ETFs start at 0.85% to 1.99%. Meanwhile, the median fee for US-issued ETFs is set around 0.25%. According to the researchers, this difference between annual management fee structures has led to goodwill among institutional investors and created a probability for long-term share holdings.
