Following Hong Kong’s authorization of the region’s first spot bitcoin and ethereum exchange-traded funds (ETFs), Bloomberg’s senior ETF analyst Eric Balchunas shared his insights on social media about the new additions. Although there were anticipations of notable capital inflows into the Hong Kong ETFs, Balchunas mentioned that while it’s a positive step forward, he emphasized that Hong Kong’s ETFs would be “lucky to get” around $500 million in total flows.
ETF Analyst Offers Sober Outlook on Newly Approved Hong Kong Bitcoin ETFs; Challenges $25B Inflow Estimate
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ETF Analyst Weighs in on Hong Kong’s Crypto ETF Impact
On Monday, the Hong Kong Securities and Futures Commission (SFC) greenlit a series of spot ETFs linked to the top two cryptocurrencies by market cap — bitcoin ( BTC) and ethereum ( ETH). This development has sparked enthusiasm within the cryptocurrency community. Before this approval, the Singapore-based crypto firm Matrixport had speculated that the ETFs might draw around $25 billion in BTC demand.
“A likely approval of Hong Kong-listed bitcoin Spot ETFs could attract several billion dollars of capital as mainland investors take advantage of the Southbound Connect program,” Matrixport remarked on Friday. Nevertheless, not everyone is on board with this prediction. For instance, the Southbound Connect program only allows eligible and qualified mainland investors in the GBA to invest in wealth management products through Hong Kong (HK) banks, adhering to specific operational guidelines.
Bloomberg’s senior ETF analyst, Eric Balchunas, challenged the feasibility of the $25 billion figure and labeled it “insane.” “Latest on HK spot bitcoin ETFs,” Balchunas wrote. “They have been approved to exist but not launch (yet). Rumor has it launching next [week] so to not compete [with] Dubai conf. Don’t expect a lot of flows (I saw one estimate of $25B that’s insane). We think they’ll be lucky to get $500 [million],” he added. Balchunas further elaborated on the reasons behind his viewpoint.
First, he said the overall Hong Kong ETF market is relatively small, valued at just $50 billion, and Chinese residents are generally not permitted to invest in these ETFs officially. Secondly, the issuers that received approval—Bosera, China AMC, and Harvest—are smaller entities, lacking the involvement of major players such as Blackrock. Thirdly, he noted that the market ecosystem in Hong Kong is less liquid and efficient, which could result in these ETFs experiencing wider spreads and premium discounts.
Additionally, Balchunas said the fees for these ETFs are expected to range between 1-2%, which is considerably higher than the low fees found in the U.S. market. The ETF analyst acknowledged that while the introduction of spot bitcoin ETFs in other countries is beneficial, their impact is minor compared to the dominant U.S. market. He added:
Just to be clear, all this is clearly positive for bitcoin as it opens up more avenues to invest, I’m just saying its child’s play vs U.S. Also long-term some of this could go away: more [liquid], tighter spreads, lower fees and bigger issuers involved. But short/medium term we have more moderate expectations. That’s all.
Since the approval of U.S. spot bitcoin ETFs, Balchunas has maintained a level-headed approach, contrasting with the often hyped-up bullish forecasts prevalent in the crypto community. He provided a reality check to bitcoin’s ‘hodler class’ when ARKB experienced significant outflows, surpassing those of Grayscale’s GBTC in the first week of April. At that point, the price volatility was more likely attributed to long-term holders selling off their positions rather than to ETF outflows.
What do you think about the latest commentary from Balchunas about the Hong Kong ETFs? Let us know what you think about this subject in the comments section below.
