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News/Bitcoin ETF Outflows: Insider's Glimpse at Hong Kong's Bold Bet

Bitcoin ETF Outflows: Insider's Glimpse at Hong Kong's Bold Bet

Van Thanh Le

May 10 2024

2 weeks ago4 minutes read
Futuristic Hong Kong skyline with Bitcoin ETF robot icon

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Latest Figures Shed Light on Hong Kong's Trailblazing Crypto ETF Journey

Recent reports highlight a noticeable fluctuation in the trading of Hong Kong's spot Bitcoin ETFs. SosoValue disclosed that on May 9, these funds experienced a withdrawal of around 90.16 BTC, marking the second day of net outflows since their introduction to the market. 

Notably, the China Asset Management's spot Bitcoin ETF saw the most substantial reduction, with 80.16 BTC departing. Close behind, the Bosera HashKey Bitcoin ETF reported a 10 BTC outflow. However, Harvest’s spot Bitcoin ETF showed no movement in either direction.

Despite these outflows, the collective holdings of these ETFs still stand strong at approximately 4,260 BTC, boasting a total net asset value of $261.45 million. This figure presents a rise from their initial market value of $247.7 million as of April 30. Although the trading volume on May 9 dipped to $2.06 million, it pales in comparison to the $9.74 million recorded on their bustling first trading day.

etfs.png
Source: SosoValue

In a broader context, Farside’s May 9 report contrasts the local ETF scene with the U.S. market, where U.S. spot Bitcoin ETFs saw a higher net outflow of $11.29 million while their Hong Kong counterparts recorded a net outflow of $5.5. million. 

The combined assets under management for the six Hong Kong spot Bitcoin and Ether ETFs have surged past $317.4 million since their inception. A significant chunk of this—over $200 million—was invested before they even hit the market, with post-launch inflows adding just another $24.7 million.

hk etfs.png
Source: Farside

Adding to the intrigue, these ETFs are denominated in three different fiat currencies and offer flexible subscription and redemption options in both crypto and fiat formats. Commenting on their scale, Bloomberg’s Senior ETF Analyst Eric Balchunas likened the market size of these ETFs in Hong Kong to a formidable $50 billion in the U.S. market, underscoring their considerable influence relative to the local economic landscape.

Early Trading Figures Reveal Ebbs and Flows in Hong Kong's Pioneering Crypto ETF Landscape

While Hong Kong's trailblazing crypto ETFs witnessed mixed fortunes in their initial trading sessions, with outflows and dwindling volumes on certain days, the industry's commitment to this nascent asset class remains unwavering. Institutions continue to throw their weight behind these innovative products, underscoring Hong Kong's ambition to cement its status as a global digital asset hub.

SOLOWIN Holdings, a brokerage primarily catering to Chinese investors, recently secured its position as a participating dealer for the new Hong Kong spot virtual asset ETFs. This strategic move signifies a significant stride towards enhancing digital asset accessibility in the region. 

Complementing this development, SOLOWIN and OSL Digital Securities have introduced a pioneering in-kind subscription and redemption mechanism, transforming investor engagement with digital assets. This partnership highlights a steadfast commitment to compliance and nurturing investor confidence in the volatile sector.

Hong Kong's aspirations to become a global digital asset nexus were further solidified with the launch of six spot ETFs for Bitcoin and Ethereum on the Hong Kong Stock Exchange. This groundbreaking initiative marks Hong Kong as the first in Asia to offer such products to retail investors and one of the pioneers worldwide to approve Ethereum ETFs.

Abstract Hong Kong skyline with Bitcoin ETFs guardian robot.webp

In a proactive effort to bolster the local ETF market's trading efficiency and capital movement, three Asian venture firms – LD Capital, Antalpha Ventures, and Highblock – announced the establishment of Hong Kong's first ETF liquidity fund valued at HK$1 billion (~$128 million) as of May 8, 2024.

MetaComp, in a strategic alliance with Bosera International, has expanded its reach to global investors through the launch of Bosera's Hong Kong-based Bitcoin and Ethereum ETFs. This collaboration aims to seamlessly integrate traditional financial services with the burgeoning digital asset sector, enhancing Bosera's digital asset management capabilities.

Wintermute, a prominent crypto market maker, has partnered to provide liquidity for the operation of Bitcoin and Ethereum ETFs in Hong Kong. This collaboration underscores the robust support for seamless trading and regulated access to digital assets within the city's financial ecosystem.

Fueling speculation about potential cross-border investment opportunities, Richard Byworth of SyzCapital hinted at the possibility of mainland Chinese investors gaining access to Hong Kong's Bitcoin ETFs through the Stock Connect system. Such a development could catalyze a significant influx of capital from mainland China to these ETFs, opening up substantial investment opportunities and fostering financial integration between the two regions.

Conclusion

Despite the early successes and challenges, industry experts remain optimistic about the long-term potential of Hong Kong's spot crypto ETFs, particularly their ability to attract overseas investors, including those from mainland China. As the city solidifies its position as a digital asset hub, these pioneering products are poised to play a pivotal role in shaping the future of financial innovation in the region.

FAQs

Q: What were the latest trading figures for Hong Kong's spot crypto ETFs? 

On May 9, Hong Kong's spot Bitcoin ETFs saw a net outflow of around 90.16 BTC. The China Asset Management's spot Bitcoin ETF saw the biggest outflow of 80.16 BTC. Despite outflows, the collective holdings were still around 4,260 BTC with a net asset value of $261.45 million.

Q: How do Hong Kong's crypto ETFs compare to their U.S. counterparts? 

Hong Kong's crypto ETFs had a net outflow of $5.5 million on May 9, while U.S. spot Bitcoin ETFs saw a higher net outflow of $11.29 million. The combined assets under management for Hong Kong's crypto ETFs have surged past $317.4 million.

Q: What is unique about Hong Kong's crypto ETFs? 

Hong Kong's crypto ETFs are denominated in three different fiat currencies and offer flexible subscription and redemption options in both crypto and fiat formats. Their market size is equivalent to a formidable $50 billion in the U.S. market.

Q: What recent developments have occurred in the Hong Kong crypto ETF market? 

SOLOWIN Holdings became a participating dealer for the new Hong Kong spot virtual asset ETFs. SOLOWIN and OSL Digital Securities introduced an in-kind subscription and redemption mechanism. Hong Kong also launched six spot ETFs for Bitcoin and Ethereum.

 

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