Hong Kong is on the verge of an innovative movement in the bitcoin space. According to a recent Bloomberg Intelligence report report, the Hong Kong Securities and Futures Commission (SFC) is expected to approve spot bitcoin ETFs with in-kind creations and redemptions in the upcoming second quarter. This development could significantly alter the cryptocurrency investment landscape, potentially positioning Hong Kong as a leader in the global bitcoin ETF market.
Noelle Acheson, a prominent voice in the crypto industry and author of the newsletter “crypto is Macro Now,” weighed in on the potential implications of this move. “The Asian crypto market is much larger than the US crypto market in terms of volume,” said Ella Acheson.
He explained two possibilities: the existing high volume could indicate that the market is already saturated, or it could suggest greater familiarity and comfort with crypto assets in Asia. “Hong Kong-listed ETFs could funnel a significant amount of money into an 'approved' portfolio allocation,” Acheson added, hinting at the potential for a major shift in investment flows.
Bloomberg ETF expert Eric Balchunas joined the discussion: underlined the importance of Hong Kong's approach of allowing in-kind creations and redemptions of spot bitcoin ETFs, in stark contrast to the United States, which only allows cash creations. “This could help boost assets under management and volume in the fast-growing region,” Balchunas said, pointing to the strategic advantage Hong Kong could gain.
Caitlin Long, Founder and CEO of Custodia Bank, highlighted Another key aspect of Hong Kong's proposed ETF structure: the ability to withdraw bitcoin directly, ensuring investors don't just hold “paper bitcoins.” Long expressed his excitement about this development, stating, “If this is true (needs confirmation), it would be HUGE, and it would be ironic, given that Hong Kong, not the United States, would be the one to do it. Meanwhile, American banks would watch from the sidelines as they are left in the dust…”
Will Hong Kong bitcoin ETFs Be Bigger Than Their US Peers?
The conversation about the potential of Hong Kong bitcoin ETFs spread beyond industry experts and into the broader crypto community. bitcoin Munger, a renowned X analyst, argument that Hong Kong ETFs could serve as a much more bullish catalyst than those in the United States.
Citing Glassnode data showing a year-over-year shift in bitcoin supply moving from the West to the East, he suggested that this trend strengthens the case for Hong Kong ETFs to eclipse their US counterparts. “Currencies have been moving from the West to the East. “There's a strong argument that Hong Kong ETFs are going to be a much more bullish catalyst than US ETFs,” he said.
However, not everyone is convinced of the disproportionate impact of Hong Kong ETFs. In a lively exchange, Eric Balchunas warned against overestimating the size of the Hong Kong market relative to the United States. “Let's not go crazy now. HK is small against the United States,” Balchunas responded.
bitcoin Munger countered by suggesting that the success of Hong Kong ETFs might not be fully appreciated yet, and any positive surprise could leave analysts, including Balchunas, baffled.
When a user posed a pertinent question about the accessibility of these ETFs for mainland Chinese investors, Balchunas responded in the negative: “No, not available.” This dampens some enthusiasm, as the all-important Chinese market, in the midst of a real estate crisis and a tilt toward gold, could have been a strong supporter of bitcoin through these ETFs.
At the time of publication, btc was trading at $70,158.
Featured image created with DALL·E, chart from TradingView.com
