As a researcher, I find the lukewarm debut of Hong Kong’s spot Bitcoin and Ethereum ETFs to be an intriguing development in the financial world. Having closely followed the cryptocurrency market for several years now, I have observed that market expectations often do not align with reality.
The financial markets in Hong Kong began quietly for the newly introduced Bitcoin and Ethereum exchange-traded funds (ETFs) in their debut, falling short of the anticipated trading volume. Despite large initial offerings, investor demand seemed hesitant based on the first day’s trading figures.
Spot Bitcoin And Ethereum ETFs See Lukewarm Debut
Several Bitcoin ETFs, including the ChinaAMC Bitcoin Trust denominated in HKD (tickers: 3042.HK and 3046.HK) and its USD equivalent, the Harvest Bitcoin Spot ETF (tickers: 3439.HK and 3179.HK), as well as the Bosera HashKey BTC ETF in USD (tickers: 3008.HK and 3009.HK), commenced trading among others.
The ChinaAMC Bitcoin and Ethereum Exchange-Traded Funds (ETFs) had impressive initial offerings, with the Bitcoin ETF raising $121 million (HK$ 950 million) and the Ethereum ETF starting at $20 million (HK$ 160 million). Yet, trading activity in these ETFs was relatively low: Bitcoin Spot ETFs recorded transactions worth $8.8 million, and Ether Spot ETFs saw a modest $2.6 million in trades.
Trader T (@pivfund2100), a well-known figure in the investment world, weighed in on X’s (previously known as Twitter) happenings of the day, expressing his viewpoint that “The trading volume is insignificant when compared to US Spot ETF. It appears that the initial offering size was excessively large in terms of liquidity. Retail investors have been the primary players in today’s market.”
This observation highlights the significant difference between the expected and actual level of market engagement, implying that the issuers may have overestimated the initial demand from investors. He further mentioned recognizing some well-known entities among the Broker/Dealers. The creation and redemption in-kind process hasn’t met expectations; we’ll assess its progression within the upcoming month or two.
Mainland Chinese investors’ absence from trading these ETFs, as mentioned by Trader T, might have contributed to the decreased trading activity. He underscored that a major hindrance is these investors’ inability to access these Exchange-Traded Funds directly.
In spite of the geographical limitations, the introduction of these ETFs signifies a significant advancement for the area, providing a controlled platform for substantial trades involving cryptocurrencies such as Bitcoin and Ether with traditional fiat currencies.
Significantly, the trading volumes of Hong Kong’s spot Bitcoin ETFs significantly underperformed their US counterparts upon debut. US-listed Bitcoin ETFs traded a substantial $655 million on their first day in January. In contrast, the combined trading volume of the six Hong Kong ETFs amounted to only $11 million, which paled in comparison to the anticipated $100 million. This disparity suggests that certain analysts may have overestimated the market potential of Hong Kong’s ETFs, particularly at the outset.
The cryptocurrency market, including Bitcoin and Ether, experienced a downturn following Hong Kong’s unenthusiastic response to its newly launched ETFs. In just three hours during European trading, Bitcoin plummeted by almost 5%, from $64,700 to $61,250. Likewise, Ether suffered a significant loss of over 7.0%, dropping from $3,250 to $3,015. These declines may be due to the market perceiving the ETFs’ lackluster performance as a reflection of weak investor confidence or a smaller-than-anticipated investor base.
At press time, BTC traded at $61,235.
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2024-04-30 17:11