Why a Hong Kong Bitcoin ETF launch ‘would be a very big deal’ as China bans crypto

Spot Bitcoin exchange-traded funds in the US have helped drive Bitcoin’s rally in 2024 — and Hong Kong may be next in line for a batch of ETFs.

‘The Year of the Crypto ETFs’

Hong Kong could list spot Bitcoin ETFs as early as this quarter, according to Bloomberg Intelligence analysts.

“This would be a very big deal,” Noelle Acheson, former head of research at Genesis, wrote in her “Crypto is Macro Now” newsletter on Saturday.

While mainland China continues to warn against cryptocurrency speculation, Hong Kong has warmed up towards virtual asset products.

In December, the Hong Kong Monetary Authority and the Securities and Futures Commission said they would consider applications for spot crypto ETFs.

If approved, the new ETFs would grant Hong Kong retail investors exposure to crypto.

An approval before the end of June “will coincide with the launch of crypto spot ETNs on the London Stock Exchange, although these will only be offered to institutional investors, which limits the likely impact,” Acheson said.

“We will probably look back on 2024 as the Year of the Crypto ETFs,” Acheson wrote.

Acheson highlighted the Asian market’s growing interest in Bitcoin amid this year’s rally, which has seen Bitcoin break new all-time highs to above $73,000.

Monthly volume for Asian spot crypto exchanges stands at about $1.5 trillion, eight times bigger than the $188 billion seen in the US, Acheson said.

Even so, she noted that “volumes do not necessarily translate into fund inflows” and that the region’s reputation as a centre for so-called wash trading should raise concerns about the legitimacy of a lot of those trades.

“But the relative weight does suggest a greater familiarity with and interest in crypto assets, even if only as a vehicle for speculation,” Acheson added.

Still, Hong Kong spot Bitcoin ETFs face a few unique challenges.

ETFs are a relatively new market in Asia, with the region only seeing $20 billion in average daily trading volume compared to the $166 billion seen in the US, Acheson said, quoting figures from the last quarter of 2023.

US spot Bitcoin ETFs have seen daily trading volumes exceed $3 billion since their January launch.

The Chinese government’s ongoing opposition to crypto in general is another possible roadblock to ETF approval, according to Acheson.

Despite headwinds, Acheson sees a positive global outlook for Bitcoin ETFs “at a time when the case for long-term positions as a hedge against currency debasement becomes even clearer.”

Crypto market movers

• Bitcoin fell about 6% to trade at $65,366 on Monday.
• Ethereum fell about 5.7%, trading at about $3,307.

What we’re reading

• BlackRock’s BUIDL swells to $275m — and it’s only the beginning for tokenisation — DL News
• Central bankers are in delusional denial about Bitcoin, CBDCs — DL News
• Jupiter Token Reaches All-Time High Amid Controversial Governance Vote to Allocate 4.5 Million JUP to Core Working Group — Unchained
• Dormant Bitcoin Wallet Transfers $35 Million Worth Of BTC After 12 Years — Milk Road
• Solana Foundation Weighs In On Racist Meme Coin Controversy — Milk Road

Tyler Pearson is a junior markets correspondent at DL News. Got a tip? Email him at ty@dlnews.com.