Bittime - Hong Kong is preparing to launch its first crypto exchange-traded fund (ETF) . This launch is predicted to attract large investment funds. ETF issuers are optimistic that tomorrow's debut (April 30 2024) will go well. Apart from that, this article will discuss 5 important things you need to know.
In fact, this debut is expected to surpass the first day earnings of crypto ETFs in the United States which reached $125 million (around IDR 2 trillion). Interest from investors from Singapore, the Middle East and others also drives these positive expectations.
Ethereum's classification as a security in the United States does not affect investor interest because Hong Kong has a different policy.
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Will Focus on Bitcoin and Ethereum
This Hong Kong crypto ETF, which will focus on Bitcoin and Ethereum, is estimated to have an issuance scale of between $200 million and $300 million (around IDR 3.2 trillion - IDR 4.8 trillion). This has the potential to reach a market size of $2-3 billion (around IDR 32 trillion - IDR 48 trillion) later.
Major Chinese asset management companies such as China Asset Management, Bosera Asset Management, and Harvest Global Investments are preparing to launch their products on April 30 through their subsidiaries in Hong Kong.
Also read: Get to know Hong Kong's Cryptocurrency Regulations
Competitive and Regulatory Challenges Await Hong Kong Crypto ETFs
The Hong Kong crypto ETF market previously saw the arrival of Bitcoin and Ether futures ETFs at the end of 2022. Initially, the presence of Bitcoin spot crypto ETFs was expected to influence crypto prices.
However, the estimate of the large influx of investment funds is doubtful due to potential restrictions from China.
Despite facing competition from regional players and investment restrictions, a Hong Kong crypto ETF will be an interesting test of market interest, especially at an early stage.
Meanwhile, other Asian countries such as South Korea and Japan are also exploring the launch of similar products. Regions like Australia are reportedly planning to launch a crypto ETF at the end of this year.
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5 Things You Need to Know
There are a few things you need to know about the launch of a Hong Kong crypto ETF. Details are below.
Hong Kong Crypto ETF Market Has Been There Before
The launch of a spot crypto ETF in Hong Kong is not the first time this has happened at HKEX (Hong Kong Exchanges and Clearing Limited). This company previously had a Bitcoin and Ether futures ETF that was traded since the end of 2022.
These ETFs are managed by CSOP Asset Management, namely CSOP Bitcoin Futures ETF and CSOP Ether Futures ETF. Both ETFs track Bitcoin and Ether futures contracts traded on the Chicago Mercantile Exchange (CME) with cash settlement (cash-settled).
Samsung Asset Management Hong Kong followed suit by launching another Bitcoin futures ETF, namely the Samsung Bitcoin Futures Active ETF, in January 2023.
Based on HKEX data as of April 29 2024, the three crypto futures ETFs on HKEX have total assets under management of 1.3 billion Hong Kong dollars (around IDR 2.7 trillion).
Also read: Hong Kong Web3 Festival 2024: The Biggest Web3 Event in Asia
Hong Kong's ETF market is still small compared to the United States
Looking at the existing data, it is clear that the Hong Kong ETF market is still much smaller than the United States. According to data from ETFGI, until the end of March 2024, there were 3,457 ETF products with total assets worth $8.9 trillion listed on three United States ETF exchanges.
On the other hand, Bloomberg data analyst Jack Wang estimates, the total market value of Hong Kong ETFs is only around $50 billion.
According to HKEX, their first active ETF was only launched in June 2019. Until the end of 2023, HKEX has 24 active ETFs with a total market capitalization of 8.6 billion Hong Kong dollars (around IDR 17.8 trillion).
For comparison, based on data compiled by Bloomberg, the total market value of China's ETFs will reach $238 billion in 2023.
Differences in Redemption Methods between Hong Kong and United States Crypto ETFs
One of the fundamental differences between Hong Kong spot crypto ETFs and similar products in the United States is the method of ETF redemption.
Unlike the Bitcoin spot ETF in the United States, the Hong Kong crypto spot ETF was created in-kind. This means that when ETF intermediaries want to create new ETF units, they need to hand over actual crypto assets such as Bitcoin to the ETF issuer.
Meanwhile, currently Bitcoin spot ETF issuers in the United States are only permitted to issue cash-created ETFs, where intermediaries are not permitted to hold Bitcoin directly.
"In my opinion, the reason Hong Kong chose the in-kind method is because they want to differentiate their products from the United States," said Bloomberg ETF senior analyst Rebecca Sin in a webinar hosted by Bloomberg on April 24.
Hong Kong Will Have World's First Spot Ether ETF
The launch of a crypto spot ETF in Hong Kong is not only interesting because of its in-kind method, but also because of the presence of an Ether spot ETF that has not yet been approved in the United States.
The United States financial regulatory authority is expected to reject Ether's spot ETF application in May and delay making a decision on the matter.
However, Hong Kong is not the first to launch an Ether ETF. Canadian regulators approved the country's first Ether futures ETF in April 2021, making Canada one of the first countries to offer this kind of investment product.
According to Nasdaq, there are currently five Ether ETFs in Canada: Purpose Ether ETF, Evolve Ether ETF, CI Galaxy Ethereum ETF, 3iQ CoinShares Ether ETF, and Fidelity Advantage Ether ETF.
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Mainland Chinese Investors Cannot Buy Hong Kong Bitcoin ETFs
The launch of a crypto spot ETF may raise optimism regarding Mainland China's attitude towards crypto, but this is not necessarily true. Mainland Chinese citizens are not expected to be able to purchase Hong Kong crypto spot ETFs despite ETF issuers having close ties to Mainland China.
Bloomberg analyst Wang said that China prohibits its citizens from carrying out crypto-related activities, including investing through crypto ETFs.
"Even for crypto futures ETFs registered in Hong Kong, I once tried to make a transaction and was rejected directly by the broker," said Wang. He believes Chinese investors will not invest in this kind of product in the near future.
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To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet. For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application.
Learn Complete Guide How to Buy Crypto on Bittime.
Monitor price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.
Also read:
Less likely than a Bitcoin ETF to be approved for an Ether ETF?
VanEck: ETF Pioneer & Its Work for Bitcoin ETFs
ETH IDR : Ethereum ETF Prospects, SEC Postpones Grayscale Ethereum Spot ETF Decision
What are the 11 Bitcoin ETFs Approved by the SEC?
DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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