Hong Kong crypto ETF products may seean inflow of around $500 million, compared to the billions of dollars in the US market, predicts Bloomberg ETF analyst.
Hong Kong regulators recently approved spot Bitcoin and Ethereum exchange-traded fund applications, but Bloomberg ETF analyst Eric Balchunas predicts that the local ETF market may not perform as well as the US due to the current lack of big players and the possibility of high fees.
According to Balchunas, the Hong Kong Bitcoin and Ether ETF market may generate $500 million in inflows, which is small compared to the over $15 billion from BlackRock’s spot Bitcoin ETF product alone in the United States.
Hong Kong Spot BTC ETF Smaller than the US
The Hong Kong Securities and Futures Commission (SFC) on April 15 granted in-principle approval for spot Bitcoin and Ethereum ETF products from China Asset Management, Harvest Global Investments, and Bosera Asset Management in partnership with HashKey Capital.
While the spot crypto approvals are a major milestone for Hong Kong, which is determined to position itself as a central digital assets hub, there are speculations that the city-state may not witness large inflows like in the United States.
Bloomberg ETF analyst Eric Balchunas, in a tweet, predicted that the Hong Kong ETF market could see an inflow of $500 million, debating another prediction that estimated $25 billion.
According to Balchunas, key factors such as the absence of major players in the Hong Kong ETF market and the possibility of these issuers charging high fees could hinder demand for the products.
The ETF analysts added that the potential local issuers are small compared to the behemoths in the United States. The US boasts financial giants such as the world’s largest asset manager, BlackRock, and Fidelity, which has nearly $5 trillion in assets under management (AUM).
In terms of fees, one to two percent, as speculated by Balchunas, may prove uncompetitive for Hong Kong Bitcoin ETF issuers, with US ETF providers offering 0.25% and lower.
As previously reported by CryptoPotato, Grayscale, which currently charges 1.5% for a management fee on its spot Bitcoin ETF, said there would be a reduction over time, following the maturity of the ETF market.
The company’s management fee is significantly higher than its rivals and has seen continuous outflows compared to competitors such as BlackRock, which continues to record gains.
When Spot Ethereum ETF in the United States?
Meanwhile, the Hong Kong spot Bitcoin ETF market could see an uptick if bigger players are involved and mainland Chinese investors are allowed access to the product, according to Balchunas.
Although the US spot Bitcoin ETF market is larger than Hong Kong’s, the latter may have an edge over the United States, being one of the first jurisdictions with an approved spot Ethereum ETF.
Since greenlighting almost a dozen applications in January 2024, the US Securities and Exchange Commission seems to be reluctant to give its approval for a similar product tracking the price of Ether, the second-largest cryptocurrency by market capitalization.
BlackRock, Grayscale, Frank Templeton, Fidelity, and Invesco are among the applicants for a spot Ether ETF. The American regulator recently delayed its decision on Ethereum filings from BlackRock and Fidelity after previous delays on other applications.
However, some analysts believe the SEC’s approval of a spot Ethereum ETF in the United States may not happen in 2024.