Why Hong Kong’s disappointing Bitcoin and Ethereum ETF launch was actually a huge success

Why Hong Kong’s disappointing Bitcoin and Ethereum ETF launch was actually a huge success
Trading volumes indicate the Bitcoin and Ethereum ETFs are almost as popular in Hong Kong as in the US — on a relative basis. Credit: Jerome Favre/EPA-EFE/Shutterstock

Six Bitcoin and Ethereum spot exchange-traded funds debuted in Hong Kong on Tuesday, drawing mixed reactions.

While analysts hailed the launch as a great success, some traders criticised the funds’ low trading volumes.

It’s all relative

The Hong Kong Bitcoin and Ethereum spot ETFs processed roughly $12.7 million in trading volume on their first day, per Bloomberg data — numbers which Singapore-based crypto trading firm QCP Capital called “terribly disappointing.”

The numbers may indicate institutional crypto interest is concentrated in the US while Asian interest is more private wealth focused and natively dominated, QCP said, further attributing Bitcoin’s 8% drop to the poor numbers.

But Bloomberg Intelligence ETF analysts James Seyffart and Eric Balchunas said that the volumes had to be understood within the wider context of Hong Kong’s market size.

“If you localise numbers, this was big,” Balchunas said.

ChinaAMC’s Bitcoin ETF alone is already the sixth most successful ETF launched in Hong Kong in the past three years, out of 82 different ETFs.

The crux of the question: the Hong Kong ETF market is worth roughly $50 billion, which makes it 168 times smaller than its US counterpart, according to Balchunas.

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Adjusting for market size, it’s as if the Hong Kong ETFs processed the equivalent of $1.6 billion in trading volume, whereas the US Bitcoin ETFs saw $4.6 billion in trading.

In other words, the Bitcoin and Ethereum ETFs were almost as popular on that day in Hong Kong than they were in the US — it’s simply that the pool of demand is much smaller.

Investors shouldn’t therefore expect them to have the same market-moving impact as the US ETFs, but that doesn’t make them a disappointment.

“By any reasonable relative measure for the launch of these ETFs — they were a massive success for the Hong Kong market,” Seyffart said.

It will take a few days to properly measure inflows, Seyffart and Balchunas said, because the full data isn’t available yet.

But ChinaAMC’s fund vacuumed $141 million worth of Bitcoin on its first day, some of it from its seeding process.

Crypto market movers

  • Bitcoin is down 5% over the past 24 hours to trade at $58,100.
  • Ethereum dropped 2.8% to $2,900.

What we’re reading

Tom Carreras is a markets correspondent at DL News. Got a tip about Bitcoin ETFs? Reach out at tcarreras@dlnews.com.