Hong Kong’s financial markets witnessed a sluggish start for newly launched Bitcoin and Ethereum exchange-traded funds (ETFs), which failed to meet initial trading volume expectations. Despite the significant initial issuance size, market interest appeared to be limited, as evidenced by first day trading data.
Spot Bitcoin and Ethereum ETFs See Lukewarm Debuts
ChinaAMC Bitcoin ETF denominated in HKD (tickers: 3042.HK and 3046.HK) and its USD equivalent Harvest BitcoinSpot ETF (tickers: 3439.HK and 3179.HK), Bosera HashKey BTC ETF denominated in USD (tickers): 3008.HK and 3009.HK) were among several ETFs that began trading.
ChinaAMC Bitcoin ETF reported a significant initial issuance size of US$121 million (HK$950 million), with a corresponding Ether launch size of US$20 million (HK$160 million). However, recorded trading volumes were minimal. The Bitcoin Spot ETF accumulated just $8.8 million, while the Ether Spot ETF accumulated just $2.6 million.
Trader T (@pivfund2100), a famous figure in the investment world, I left a comment. Commenting on the day’s activity, Retail investors are today’s major players.”
These observations highlight the discrepancy between expected and actual market participation, suggesting that issuers may have overestimated initial market demand. “I saw some familiar names in the broker/dealer ranks,” he said. In-kind creation/rescue did not perform as expected. “We’ll have to see how it goes in a month or two.”
As Trader T points out, the lack of participation from mainland Chinese investors likely played a role in the decline in trading volume. “These ETFs are not accessible to mainland Chinese investors,” he said, highlighting significant market limitations.
Despite these geographic limitations, ETFs represent an important development in the region by providing a regulated mechanism for large-scale transactions between fiat currencies and cryptocurrencies such as Bitcoin and Ethereum.
In particular, the performance of the Hong Kong spot ETF contrasts sharply with that of the U.S. spot ETF. On the first trading day of January, trading volume for US-based spot Bitcoin ETFs reached $655 million. In contrast, total trading volume of $11 million for Hong Kong’s six ETFs was well below the expected $100 million. This discrepancy shows that some analysts probably overestimated Hong Kong’s potential from the beginning.
The broader cryptocurrency market reacted negatively to the lukewarm reception to the Hong Kong ETF. Bitcoin fell nearly 5% from $64,700 to less than $61,250 in three hours during European trading hours. Likewise, Ethereum fell more than 7.0% from $3,250 to $3,015. This move could be due to the market’s interpretation of the ETF’s underperformance. This is due to lack of trust or a smaller than expected investor base.
At press time, BTC was trading at $61,235.
Featured image created with DALL·E, TradingView.com chart