Hong Kong Spot Crypto ETF is Approved, Will Bitcoin Return to its Upward Trend?

[TL；DR]:

On the 15th of this month, Huaxia Fund (Hong Kong), Boshi Fund (International) Limited, and Jiashi Investment successively announced that they have obtained principle approval from the Hong Kong Securities Regulatory Commission and plan to issue Bitcoin and Ethereum spot ETFs.

The virtual asset ETF varieties approved by the Hong Kong Securities and Futures Commission cover Bitcoin and include Ethereum ETFs that have not yet been approved by the US SEC and support both cash and physical redemption methods.

We need to observe for some time whether Hong Kong can compete for more pricing power on Ethereum and introduce more liquidity into the crypto market.

Introduction

This Monday, the Hong Kong Securities and Futures Commission (SFC) conditionally approved the applications of Huaxia Fund (Hong Kong), Bosera Fund (International) Limited, and Jiashi Investment to issue Bitcoin and Ethereum spot ETFs, marking Hong Kong as the second judicial region in the world to approve such products after the United States this year.

This article will delve into how the passage of Hong Kong’s spot crypto ETF will disrupt the market and impact investors in the future.

Hong Kong Spot Crypto ETF Boots have Landed, with Mixed Market Reactions

Just this Monday, Huaxia Fund (Hong Kong), Bosera Fund (International) Co., Ltd., and Harvest Investment successively released announcements on the official account, indicating that they had obtained the approval in principle from the Hong Kong Securities Regulatory Commission and planned to issue Bitcoin and Ethereum spot ETF.

Among them, Huaxia Fund (Hong Kong) cooperates with OSL and chooses Bank of China International UK Prudential Trust Co., Ltd. as the custodian institution; Jiashi Investment also selected OSL as the virtual asset trading platform and custody partner; Boshi International, on the other hand, jointly issues and manages related products with HashKey Capital.

Source: Guosheng Securities

The market has always been optimistic about the progress of Hong Kong spot crypto ETFs, and this move is also seen as a significant positive. Of course, there is controversy over the specific scale of capital inflows.

QCP Capital believes this will release institutional investment demand during Asian trading hours, which is bullish in the short term. Matrixport provided specific predictions that the Bitcoin ETF listed in Hong Kong may release demand of up to $25 billion.

Of course, Bloomberg analysts have also pointed out that Hong Kong spot crypto ETFs may attract around $500 million in funds, which is much smaller than the size of the US market and will not have a significant impact on the market. According to SoSoValue data, in the past three months, the cumulative net inflow of US Bitcoin spot ETFs has exceeded $12.4 billion, and the total net asset value has surpassed $34 billion.

However different the differences may be, what we can see from the reaction of crypto market prices is that after the approval news of Hong Kong Bitcoin spot ETF and Ethereum spot ETF was announced, the market continued its rebound trend, slowing down the downward trend of Bitcoin and Ethereum due to the impact of the international war situation.

Source: Gate.io

Overall, the market response was lackluster, with Bitcoin and Ethereum slightly rising, but Hong Kong concept coins showed significant gains, with an average short-term increase of 10%.

Innovation Analysis of Hong Kong Spot Crypto ETF

The Hong Kong market initially issued futures crypto ETFs, which were not very attractive to investors and had relatively weak liquidity. The launch of spot ETFs has just made up for these shortcomings and presented differences from US spot ETFs.

Firstly, the virtual asset ETF varieties approved by the Hong Kong Securities and Futures Commission cover Bitcoin and include Ethereum ETFs that have not yet been approved by the US SEC. This provides essential support for the practical application of Ethereum.

Source: Hong Kong Securities and Futures Commission (SFC)

Adrian Wang, CEO of Metalpha, believes that Ethereum ETFs may be more attractive than Bitcoin ETFs, as there are currently no stocks with ETH-related concepts.

Again, unlike the US SEC, which only allows cash redemption of Bitcoin ETFs, Hong Kong’s Bitcoin and Ethereum ETFs support cash and physical redemption methods.

Cash redemption requires obtaining virtual assets on a licensed exchange in Hong Kong, while physical redemption requires transferring to a fund custody account through a securities firm. This flexibility gives investors more choices and liquidity, making it easier for institutional and individual investors to diversify their investments.

In contrast, the United States only allows cash redemption, reducing money laundering risks by reducing intermediaries and increasing cash custodians. Still, the operation is more traditional, reflecting the cautious attitude of US regulators toward such products. Physical redemption is faster and more convenient, but the market risk is relatively high.

Future Prospects of Hong Kong Spot Crypto ETFs

It is not difficult to see from the above that Hong Kong’s spot crypto ETFs have shown a more open attitude than the world’s most influential United States. Not only have they quickly incorporated Ethereum spot ETFs, gaining a first-mover advantage, but they have also demonstrated more inclusive characteristics in the design of ETF mechanisms than the United States.

In the past, Hong Kong’s layout and actions in the Web3 field were relatively lagging, which caused dissatisfaction in the industry. However, the launch of Bitcoin and Ethereum spot ETFs is expected to change this passive situation and win a crucial battle for Hong Kong’s position as a global web3 financial center.

The launch of these ETFs not only expands the incremental market but also bridges the gap between traditional finance and virtual assets, achieving a broader market win-win situation.

In addition, these developments highlight the clear commitment and support of the Hong Kong government in the field of virtual assets, enhance Hong Kong’s position in the global fintech field, and provide confidence for international investors and project developers.

Of course, from the perspective of crypto influence, in the past two years, Hong Kong’s crypto-friendly policies have been frequent but less discussed, and the market has shown a slight stagnation. Hong Kong has a weak competitive advantage in the crypto industry in North America.

However, the Web3 Carnival held in Hong Kong in recent years and the listing of spot ETFs are expected to change this pattern and bring new opportunities to the crypto industry in Hong Kong. Adam Zhou, co-founder of Hong Kong crypto company VDX, optimistically predicts that unicorn companies will emerge in the Hong Kong crypto industry.

Source: Gate.io

Despite many challenges, Hong Kong has demonstrated its vast potential in the crypto field by launching Bitcoin and Ethereum spot ETFs. These ETFs not only bridge the gap between traditional finance and virtual assets, enhance the image and legitimacy of virtual assets, but also increase market liquidity and acceptance, helping to promote innovation and development in the crypto industry in the Asia Pacific region.

We still need to observe whether Hong Kong can compete for more pricing power on Ethereum and introduce more liquidity into the crypto market. But what can be sure is that the launch of Bitcoin and Ethereum spot ETFs in Hong Kong has provided a reason for Optimism about the development of its crypto industry in the current halving market, and Gate.io will continue to monitor the positive changes in Hong Kong’s cryptocurrency-friendly policies.