Hong Kong boosted the cryptocurrency market today by approving Bitcoin Spot ETFs. Famous ETF analyst Eric Balchunas from Bloomberg shared his views on this development.
According to Balchunas, the launch of these ETFs following approval is said to take place next week and has been strategically timed to avoid clashing with a conference in Dubai. However, Balchunas cautioned against high expectations of significant investment flows into these ETFs. Balchunas believes that even though there are estimates as high as $25 billion, it would be a great chance for them to attract even $500 million.
The analyst states that there are four reasons for these moderate expectations:
- The Hong Kong ETF market is relatively small, valued at just $50 billion. Additionally, Chinese locals are not officially allowed to purchase these ETFs.
- The three approved companies, Bosera, China AMC and Harvest, are relatively small-sized firms. Industry giants like BlackRock are yet to get involved.
- The underlying ecosystem in Hong Kong is less liquid and efficient, which may cause these ETFs to experience wide spreads and premium reductions.
- Fees for these ETFs are likely to be between 1-2%; This is in stark contrast to the significantly lower wages in the US market, which Balchunas calls the “Terrordome”.
Despite these challenges, Balchunas emphasized that the addition of Bitcoin ETFs by other countries is undoubtedly beneficial, albeit on a smaller scale compared to the US market. “Other countries adding BTC ETFs is undoubtedly a contribution, but it is almost a pittance compared to the strong US market,” Balchunas said.
Balchunas also underlined the long-term potential of these developments. Over time, the market may see greater liquidity, tighter spreads, lower fees, and participation from larger issuers. However, according to the analyst, expectations should remain moderate in the short and medium term.
Finally, Balchunas said that Ethereum ETFs have also been approved, and the $500 million estimate includes all approved ETFs.
*This is not investment advice.