Hong Kong’s Debut of Bitcoin and Ethereum ETFs

In a landmark event for Asia’s financial markets, Hong Kong witnessed the trading debut of six new spot Bitcoin and Ethereum ETFs on Tuesday, with over $80 million Hong Kong Dollars (approximately $10 million USD) in shares traded, as per data from the Hong Kong Exchange. This pioneering move establishes Hong Kong, a special administrative region of China, as the first in Asia to introduce trading in spot virtual asset ETFs.

The introduction of these ETFs marks a significant evolution in Hong Kong’s financial landscape. Previously, in late 2022, the region saw the launch of funds based on digital asset futures, but the new spot ETFs represent a deeper commitment to integrating cryptocurrencies into mainstream financial products. Industry experts have speculated that these new offerings could potentially inject upwards of $25 billion into the market if expanded to include mainland Chinese investors.

Comparative data from the first quarter of 2024 highlights the impact of these new products. The combined average daily turnover (ADT) for the three futures ETFs was $51.3 million HKD ($6.5 million USD), a substantial increase from $8.9 million HKD in the same quarter of the previous year. This surge underscores the growing investor interest in cryptocurrency-based financial instruments in the region.

Despite their strong start, the performance of Hong Kong’s spot ETFs pales in comparison to their U.S. counterparts. When U.S. spot Bitcoin ETFs launched in January, they saw a staggering $4.5 billion worth of trading on their debut. Currently, these U.S. ETFs hold over 215,000 BTC, valued at approximately $11.9 billion USD.

The Hong Kong ETFs, managed by Harvest Global Investments, China Asset Management, and Bosera and Hashkey, saw differing performances between Bitcoin and Ethereum offerings. By the close of the market on their first day, Bitcoin ETFs had gained about 2%, while Ethereum ETFs experienced a slight decline of 0.5%.

The breakdown of the trading figures is quite telling. The ChinaAMC Bitcoin ETF dominated the market on its debut day, capturing 57% of all Bitcoin ETF turnover. The Harvest Bitcoin Spot ETF followed with 29%, and the Bosera Hashkey Bitcoin ETF accounted for the remainder.

A similar distribution was observed among the Ethereum funds. The ChinaAMC Ethereum fund led with 65% of the turnover, followed by Harvest at 25%, and Bosera Hashkey covering the remaining share.

The successful launch of these ETFs not only enhances Hong Kong’s position as a financial hub but also reflects the region’s adaptive approach to the evolving landscape of global finance. As these products mature, their influence on both regional and global markets will be critical to watch, potentially setting a precedent for other Asian markets to follow.