Hong Kong Spot Bitcoin ETFs Won’t See Much Inflows, Says Bloomberg Analyst

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Today, the Hong Kong Securities and Futures Commission (SFC) gave its approval for two Bitcoin and Ethereum exchange-traded funds (ETFs) to be listed for trading within the next fortnight. This news has sparked significant excitement in the cryptocurrency world, indicating a growing acceptance of crypto investment vehicles. Nevertheless, a pressing concern among investors is whether these Hong Kong spot Bitcoin and Ethereum ETFs will attract the same level of inflows as their US counterparts.

Bloomberg Analyst Doesn’t Expect Much Inflows in HK Bitcoin ETFs

According to Eric Balchunas, Bloomberg’s ETF expert, there might be excessively high hopes regarding the inflow of Bitcoin ETF investments in Hong Kong. He shared his perspective on this matter.

According to Balchunas, the anticipated flows were more likely around $500 million instead of the suggested $25 billion. He provided several explanations for why he took a cautious approach in his estimation.

  1. The Hong Kong ETF market is relatively small, with only about $50 billion in total assets, and local Chinese investors may face restrictions in accessing these ETFs.
  2. The approved issuers, including Bosera, China AMC, and Harvest, are relatively small players compared to industry giants like BlackRock.
  3. The ecosystem supporting these ETFs may lack liquidity and efficiency, potentially leading to wider spreads and premium discounts.
  4. The fees associated with these ETFs are expected to be between 1-2%, significantly higher than the low-cost fees typically found in the US market.

Balchunas pointed out that although the introduction of Bitcoin ETFs in other countries is a good sign, it doesn’t come close to matching the significant influence of the US market in this regard.

In the latest update regarding Bitcoin ETFs in Hong Kong, they have been given the green light to exist but are yet to start operations. There are whispers that they might debut next week to avoid clashing with a conference in Dubai. However, do not be swayed by rumors of $25 billion in flows, which is an unrealistic expectation. More likely, these ETFs will manage to attract around $500 million. Here’s the reasoning:

— Eric Balchunas (@EricBalchunas) April 15, 2024

Balchunas highlighted the benefits of Bitcoin ETFs, explaining they offer new ways to invest in Bitcoin beyond the US market. Although their influence might initially be minimal, he suggested that over time, enhancements like greater liquidity, narrower price differences, reduced costs, and participation from larger financial institutions could offset these drawbacks.

Analysts Increase Bitcoin Price Targets to $650,000

Bitcoin expert Willy Woo anticipates that the launch of new Bitcoin ETFs may cause the price to drop to a bottom of around $91,000 during bear markets and soar to a bull market peak of approximately $650,000. These figures represent the estimated maximum investment from ETF investors based on their asset managers’ advice. However, Woo believes these numbers are modest, implying that Bitcoin could potentially exceed gold’s market capitalization once the role of ETFs has been fully realized.

According to asset manager predictions, investing in new Bitcoin ETFs could lead to price goals of $91,000 during a bear market and an astounding $650,000 during a bull market, once these funds have been fully invested.

These are very conservative numbers. #Bitcoin will beat gold cap when ETFs have…

— Willy Woo (@woonomic) April 15, 2024

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2024-04-15 17:30