2024-05-07
Hong Kong's spot Bitcoin exchange-traded funds (ETFs) have not performed as well as their counterparts in the United States since their launch.
According to data from Farside Investors, the three spot Bitcoin ETFs that were launched in Hong Kong on April 30 have attracted a total of $262 million in assets under management (AUM), with the majority of the funds subscribed before the listing.
However, in the first week of launch, these ETFs only received asset inflows of less than $14 million, which is significantly lower than the billions of dollars that flowed into U.S. spot Bitcoin ETFs in January.
Farside Investors commented that the launch of Bitcoin and Ethereum ETFs in Hong Kong is not as significant as the launch of similar ETFs in the United States.
Additionally, the Hong Kong spot Ether ETFs, which are the first of their kind in the world, also did not make a strong impression, with a total AUM of $54.2 million and total inflows of $9.3 million as of May 6.
The Hong Kong spot crypto ETFs were seen as improvements compared to their U.S. counterparts.
They are denominated in three fiat currencies and allow investors to buy and redeem ETF units directly using Bitcoin or Ether.
Eric Balchunas, a senior Bloomberg ETF analyst, wrote that the Hong Kong ETFs should not be expected to generate large numbers compared to the U.S. market.
However, he mentioned that the $310 million AUM of the Hong Kong ETFs is equivalent to $50 billion in the U.S. market, indicating their relative significance.
The Hong Kong equities sector is relatively small, with a total market cap of $4.5 trillion, compared to the $50 trillion worth of listed equities across all U.S. exchanges.
The sector is also less liquid due to slower economic growth in mainland China since 2022.
A recent study by crypto exchange OSL found that nearly 80% of crypto-savvy investors in Hong Kong plan to invest in the new spot Bitcoin and Ether ETFs.
However, mainland Chinese investors are currently unable to access these assets unless they also possess Hong Kong residency.
SoSoValue researchers commented that this restriction, along with strict investor qualifications, limits transaction volume and hinders mainland Chinese participation.
Researchers at SoSoValue also noted that after an initial teaser fee period, the management fees of Hong Kong crypto ETFs range from 0.85% to 1.99% annually, which is significantly higher than the average annual management fees charged by U.S. issuers (0.25%).
They suggested that institutional investors who are optimistic about the crypto market and want to hold it for a long time may find the holding cost of U.S. Bitcoin ETFs to be lower due to the fee difference.
