Hong Kong’s financial market witnessed a subdued start for its newly launched spot Bitcoin and Ethereum exchange-traded funds (ETFs), which did not meet initial trading volume expectations. Despite substantial initial issuance sizes, market interest appeared restrained, as evidenced by the trading data for the first day.
Spot Bitcoin And Ethereum ETFs See Lukewarm Debut
The ChinaAMC Bitcoin ETF, denominated in HKD (tickers: 3042.HK and 3046.HK) and its USD equivalent, the Harvest BitcoinSpot ETF (tickers: 3439.HK and 3179.HK), alongside the Bosera HashKey BTC ETF in USD (tickers: 3008.HK and 3009.HK), were among the several ETFs that began trading.
The ChinaAMC Bitcoin ETF reported a significant initial issuance size of $121 million (HK$ 950 million), with its Ether equivalent launching at $20 million (HK$ 160 million). However, the trading volumes recorded were modest: the Bitcoin Spot ETFs accumulated only $8.8 million, while Ether Spot ETFs recorded a mere $2.6 million.
Trader T (@pivfund2100), a noted figure in the investment community, commented on X (formerly Twitter) regarding the day’s activities, stating, “Trivial volume comparing to US Spot ETF, seem initial issuance size is over-prepared on liquidity wise; Retail investors are major participants for today.”
This observation underscores the discrepancy between the anticipated and actual market participation, suggesting that the issuers may have overestimated initial market demand. He added, “saw some familiar names on Broker/Dealer. In-kind creation/redemption hasn’t performed as it supposed to, should see how it goes in a month or two.”
The lack of participation from Mainland Chinese investors, as pointed out by Trader T, possibly played a role in the dampened trading volumes. “Investors from Mainland China can’t access these ETFs,” he noted, highlighting a significant market limitation.
Despite these geographical restrictions, the ETFs represent an important development for the region by offering a regulated mechanism for large-scale transactions between cryptocurrencies like Bitcoin and Ether and fiat currencies.
Notably, the performance of Hong Kong’s spot ETFs starkly contrasts with their US counterparts. On their inaugural trading day in January, US-based spot Bitcoin ETFs saw a volume of $655 million. In contrast, the combined $11 million trading volume of Hong Kong’s six ETFs fell far short of the expected $100 million. This discrepancy shows that some analysts have probably overestimated the potential of Hong Kong, certainly at the start.
The broader cryptocurrency market reacted negatively to the lukewarm reception of Hong Kong’s ETFs. Bitcoin dropped nearly 5% from $64,700 to just under $61,250 within three hours during European trading hours. Similarly, Ether fell by more than 7.0 % from $3,250 to $3,015. These movements could be attributed to the market’s interpretation of the ETFs’ underperformance as a lack of confidence or a smaller-than-expected investor base.
At press time, BTC traded at $61,235.
Featured image created with DALL·E, chart from TradingView.com