Ether and Bitcoin ETFs in Hong Kong expected to struggle in reaching $500m.

Three newly approved exchange-traded funds (ETFs) for Bitcoin (BTC) and Ether (ETH) in Hong Kong may not have as much impact as anticipated, according to Eric Balchunas, a senior ETF analyst at Bloomberg. The Hong Kong Securities and Futures Commission (SFC) recently granted conditional approvals to three offshore Chinese asset managers, namely Harvest Fund Management, Bosera Asset Management, and China Asset Management, to issue spot Bitcoin and Ether ETFs. However, Balchunas cautioned against overly optimistic predictions that these ETFs could attract $25 billion in investments. He highlighted four main reasons why crypto investors should manage their expectations for these products. Balchunas emphasized that the Hong Kong ETF market is relatively small compared to the United States, and Chinese retail investors do not have official access to these ETFs. He also pointed out that these three asset managers are significantly smaller than industry giants like BlackRock. Additionally, Balchunas noted that the capital environment for these funds is less efficient and fees are likely to be higher compared to the US market. He concluded that while the addition of Bitcoin ETFs in other countries is positive, it is still insignificant compared to the US market. On the other hand, Jamie Coutts, the chief crypto analyst at Real Vision and former crypto analyst at Bloomberg Intelligence, argued that despite concerns about the size of the Hong Kong ETF market, these products would provide Chinese investors with access to a significant amount of capital. Coutts believes that Chinese investors are already adept at circumventing government-imposed capital controls. The Hong Kong FSC approved the launch of spot Bitcoin and Ether ETFs using an in-kind model, which allows new ETF shares to be issued directly using BTC and ETH. This model differs from the cash-create redemption model used by US spot Bitcoin ETFs, as the SEC is concerned about potential money laundering and fraud-related issues. The spot ETFs are expected to launch in approximately two weeks.