The Hong Kong financial market witnessed a muted start for its recently launched bitcoin and ethereum spot exchange-traded funds (ETFs), which fell short of initial trading volume expectations. Despite significant initial issuance volumes, market interest seemed moderate, as evidenced by the first day's trading data.
bitcoin and ethereum spot ETFs experience lukewarm debut
The HKD-denominated ChinaAMC bitcoin ETF (tickers: 3042.HK and 3046.HK) and its USD equivalent, the Harvest BitcoinSpot ETF (tickers: 3439.HK and 3179.HK), along with the Bosera HashKey ETF btc in USD (tickers: 3008.HK and 3009.HK), were among several ETFs that began trading.
The ChinaAMC bitcoin ETF reported a significant initial issuance size of $121 million (HK$950 million), and its Ether equivalent launched at $20 million (HK$160 million). However, the trading volumes recorded were modest: bitcoin spot ETFs accumulated only $8.8 million, while Ether spot ETFs recorded just $2.6 million.
Trader T (@pivfund2100), a prominent figure in the investment community, twitter.com/pivfund2100/status/1785121870607798620″ target=”_blank” rel=”noopener nofollow”>commented on “Retail investors are the main participants today.”
This observation highlights the discrepancy between predicted and actual market participation, suggesting that issuers may have overestimated initial market demand. He added: “I saw some familiar names on Broker/Dealer. Creation/redemption in kind hasn't worked out like it was supposed to, we should see how it goes in a month or two.”
The lack of participation from mainland Chinese investors, as noted by Trader T, possibly influenced the decline in trading volumes. “Investors from mainland China cannot access these ETFs,” he said, highlighting a major market limitation.
Despite these geographical restrictions, ETFs represent an important advancement for the region by offering a regulated mechanism for large-scale transactions between cryptocurrencies such as bitcoin and Ether and fiat currencies.
In particular, the performance of Hong Kong spot ETFs contrasts sharply with that of their US counterparts. On its inaugural trading day in January, US-based spot bitcoin ETFs recorded volume of $655 million. In contrast, the combined trading volume of $11 million of the six Hong Kong ETFs was well below the expected $100 million. This discrepancy shows that some analysts probably overestimated Hong Kong's potential, at least initially.
The broader cryptocurrency market reacted negatively to the lukewarm reception of Hong Kong ETFs. bitcoin fell almost 5%, from $64,700 to just under $61,250 in three hours during European trading hours. Similarly, Ether fell more than 7.0% from $3,250 to $3,015. These moves could be attributed to the market interpreting ETFs' underperformance as a lack of confidence or a smaller-than-expected investor base.
At the time of publication, btc was trading at $61,235.
Featured image created with DALL·E, chart from TradingView.com
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