Hong Kong's Bitcoin ETFs Trail Behind U.S. Counterparts In Initial Week Performance
Summary:
Bitcoin exchange-traded funds (ETFs) launched in Hong Kong are underperforming compared to their U.S. counterparts, attracting $262 million in assets under management during their first week, significantly less than billions invested in U.S. Bitcoin ETFs in January. Despite this, analysts argue that in relation to their respective markets, the Hong Kong crypto ETFs are as significant as those in the U.S. The ETFs also face challenges, including access restrictions for mainland Chinese investors and higher annual management fees after the initial fee-free period.
In the first week since their introduction, Bitcoin exchange-traded funds (ETFs) from Hong Kong are trailing significantly behind their American equivalents. Figures gathered by Farside Investors reveal that the three Bitcoin (BTC) ETFs, which were unveiled in the global city on April 30, now have $262 million in assets under management (AUM). This streaming in of capital primarily arrived before the ETFs were formally listed. A contrast is seen in the funds' relatively insignificant $14 million increase in assets during their inaugural week, when compared to the billions achieved by U.S Bitcoin ETFs in January. The Hong Kong-based cryptocurrency ETFs have drawn in a minute fraction of assets when compared to those based in the U.S.
Farside Investors hold the position that the unveiling of the Bitcoin and Ethereum ETFs in Hong Kong is far less monumental than that of their American counterparts. In another disappointing performance, Hong Kong's Ether (ETH) ETFs, the first of their kind globally, amassed only $54.2 million in AUM and $9.3 million in total inflows as of May 6.
Despite falling short of their American counterparts, the Hong Kong cryptocurrency ETFs were seen as advantageous upgrades as they are denominated in three flat currencies and provide investors the ability to directly buy and redeem ETF units through Bitcoin or Ether.
Bloomberg senior ETF analyst Eric Balchunas suggested that despite the weak showing in Hong Kong compared to the U.S, the HK ETFs at $310m are equal to $50b in the U.S market. This, therefore, suggests that the ETFs are just as important to the local market as American ETFs are to the U.S market.
Hong Kong's equity sector is currently dwarfed by that of the U.S, with a market cap of $4.5 trillion compared to the $50 trillion market cap across all U.S exchanges. A contributing factor to this discrepancy is the greater illiquidity of Hong Kong’s equities due in part to slowed economic expansion in mainland China starting from 2022.
A study by crypto exchange OSL suggests that nearly 80% of crypto-conversant investors in Hong Kong plan to invest in the new Bitcoin and Ether ETFs. However, these assets are currently limited to Hong Kong residents, excluding mainland Chinese investors.
According to SoSoValue, the strict restrictions on investor qualifications continue to hamper the Hong Kong cryptocurrency ETF. "Only those not residing in mainland China or the U.S can trade. The market anticipates mainland funds to be traded using southbound Hong Kong Stock Connect, but this is not presently allowed and is expected to take quite a while to open."
Finally, the same team at SoSoValue highlights that after an initial charge-free period, the annual management fees for Hong Kong-based crypto ETFs range from 0.85% to 1.99%. This figure surpasses the U.S average annual fees of 0.25%, indicating a lower holding cost for long-term, optimistic investors in the United States's Bitcoin ETFs.
Published At
5/6/2024 7:58:28 PM
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