Bloomberg Analyst Downplays Impact of New Bitcoin, Ether ETFs in Hong Kong
Summary:
The recently approved spot Bitcoin and Ether ETFs in Hong Kong may not make as significant an impact as anticipated, according to Bloomberg ETF analyst Eric Balchunas. He downplayed predictions of $25 billion in inflows, suggesting instead a likely $500 million. The Hong Kong ETF market's size, accessibility for Chinese retail investors, and the dominance of major asset management firms were cited as reasons. Despite the concerns, Jamie Coutts, Chief Crypto Analyst at Real Vision, believes the new ETFs could access a "massive pool of capital" from Chinese investors adept at navigating capital controls.
The recent approval of three spot Bitcoin and Ether exchange-traded funds (ETFs) in Hong Kong may not create the expected impact, as per Eric Balchunas, the senior Bloomberg ETF analyst. The Hong Kong Securities and Futures Commission (SFC) granted conditional approvals to three offshore Chinese asset managers on April 15, including Harvest Fund Management, Bosera Asset Management, and China Asset Management. These managers can now start issuing spot Bitcoin and Ether ETFs. But, Balchunas, in a post on April 15, questioned the prediction of the ETFs attracting $25 billion in inflows. Pointing out four reasons, Balchunas cited that it's more likely to witness around $500m in inflows.
Relating to his stand, the Bloomberg analyst noted Hong Kong's ETF market is "tiny" compared to the US and these new ETFs don't give Chinese retail investors direct access. The three companies issued ETFs are small in comparison to asset management giants, such as BlackRock, which currently manages more than $9 trillion assets. Balchunas wrote in a follow-up post: “U.S. spot bitcoin ETFs have more assets than the entire HK ETF market.”
Additionally, he explained that the capital environment is less efficient for these ETFs and the fees would likely be set at around 1-2%; in contrast, US has got “dirt cheap fees". He further described the event, “Other countries adding [Bitcoin] ETFs is no doubt additive but it's nickel-dime compared to the mighty US market.”
Real Vision's chief crypto analyst, Jamie Coutts, however, contended that despite the limited size of the Hong Kong ETF market, these products might tap into a “massive pool of capital” from Chinese investors who are adapt at circumventing government-imposed capital controls.
The approved spot Bitcoin and Ether ETFs, to be launched in about two weeks, will use an in-kind model where new ETF shares could be issued directly using Bitcoin and Ether. This model is in contrast to the cash-create redemption model, allowing the creation of new ETF shares only with cash. In the US, spot Bitcoin ETFs use cash-create model as there is a concern that it could facilitate money laundering and fraudulent activities.
Published At
4/16/2024 3:53:00 AM
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