As a seasoned crypto investor with roots deeply entrenched in both the Western and Eastern financial landscapes, I find myself intrigued by the contrasting fortunes of Bitcoin and Ethereum ETFs in the United States versus Hong Kong.
The excitement around the debut of spot Ethereum and Bitcoin ETFs in the U.S. is escalating, and now, Hong Kong is venturing into the development of a market for these digital asset ETFs. Yet, the performance of these ETFs in Hong Kong hasn’t mirrored their success in the U.S., sparking debate about the reasons behind this difference.
Hong Kong’s Bitcoin ETFs Struggle Despite Strong Initial Launch
On April 30th, six exchange-traded funds (ETFs) focused on virtual assets were introduced in Hong Kong, generating notable attention with an initial offering of $248 million—outstripping the approximately $125 million amassed by US Bitcoin ETFs during their debut in January.
Nevertheless, even with this encouraging initial phase, the following market performance has shown signs of being less than hopeful. According to a recent study by Jason Jiang, researcher at OKG, as of mid-May, the combined assets managed by Hong Kong’s six ETFs amounted to approximately HKD 2 billion (approximately USD 264 million).
In comparison, while changes affect Hong Kong’s local financial market significantly, they are minor when considering the U.S. market, as spot Bitcoin ETFs in the U.S. have amassed around $51.4 billion in managed assets just nine months following their introduction.
As a crypto investor, I’ve noticed a dip in market activity recently. In the early days, Hong Kong’s virtual asset spot ETFs saw a whopping HKD 520 million in total trading volume. However, the daily trading volumes have been on a rollercoaster ride, plunging below the HKD 40 million mark quite a few times.
In my analysis, I’ve observed a consistent trend over the past four days where Bitcoin ETFs, specifically those focusing on three key spots, have seen net withdrawals. Similarly, the Ethereum spot ETF has been grappling with comparable issues.
Jiang argues that one significant benefit of Hong Kong’s Bitcoin ETFs lies in their ability for physical redemption. This characteristic potentially attracts local crypto investors and Bitcoin miners. Nevertheless, on-chain data indicates that miners are currently holding back, choosing to watch the market instead of participating actively.
From my perspective as an analyst, I’ve observed a cautious trend mirrored in the reduction of miner wallet balances, dipping to their lowest point in six months. Adding to these concerns, Hong Kong encounters obstacles related to fee structures, which could potentially discourage miners from participating in the Bitcoin ETFs market.
Lack Of Staking Support Hinders Ethereum ETF Appeal
Based on Jiang’s examination, it appears that the Ethereum spot ETF has not performed as well as expected. With a relatively small 15.11% market share and assets under management (AUM) approximately equal to HKD327 million, the Ethereum ETF has found it challenging to garner investor attention.
More recent advancements, like the Cancun update, haven’t led to the expected increase in on-chain actions as hoped. Additionally, the absence of a staking feature for the ETF has reduced its attractiveness towards potential investors.
If individuals can’t stake their Ethereum, the reporter points out that current Ethereum owners might hesitate to join, since they would miss out on staking earnings if they invest in the ETF instead.
Based on research findings, various elements might influence the evolution of Hong Kong’s virtual asset ETF market. If an Ethereum spot ETF utilizing the proof-of-stake (PoS) mechanism is approved, it could pave the way for other popular public chain tokens, such as Solana, to enter this market.
Moreover, Jiang contends that Exchange-Traded Funds (ETFs) focused on digital spot assets serve as a connecting link, converting lesser-known digital assets into more conventional investment options. This transition might allow financial institutions to create derivative products, such as margin trading and wealth management tools, which were inaccessible using only physical Bitcoin assets.
At the time of writing, BTC is trading at $63,100, down 0.3% over the past 24 hours.
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2024-09-25 07:12