Asia's first spot bitcoin and ether exchange-traded funds, managed by China Asset Management (ChinaAMC), Harvest Global and Bosera/HashKey, were widely considered to have a disappointing debut on the Hong Kong Stock Exchange yesterday.

The six new spot bitcoin and ether ETFs — one bitcoin and one ether ETF per issuer — recorded a combined $11.2 million in trading volume on Tuesday, according to Hong Kong Stock Exchange data, led by ChinaAMC's spot bitcoin ETF. 

That figure pales in comparison to the $4.5 billion first-day volume for the spot bitcoin ETFs launched in the U.S. in January. However, the caveat is that although the Hong Kong market is smaller, the issuers already had assets under management lined up before trading began, whereas in the U.S. this was held back until the ETFs debut.

“We tried to warn everyone to lower expectations re HK. That said, if you localize numbers this was BIG: eg ChinaAMC bitcoin ETF took in $123 million on day one which already ranks it 6th of 82 ETFs launched in the past 3 years in HK and top 20% overall,” Bloomberg ETF analyst Eric Balchunas said.

“I think one of the confusing things about this launch is the big gap between day one assets vs volume. Looks like they had AUM already in before trading vs in the U.S. the issuers would rather have the pre-planned investors buy in on day one so the volume is impacted which helps with marketing. In the end it's the same, one method just gives you more optical bang for the buck,” he added.

In addition to investors in Hong Kong, the spot crypto ETFs are also available for qualified investors outside the city. However, those in the Chinese mainland are still restricted from investing in the products.

In contrast to the U.S. spot bitcoin ETFs, which require cash creation and redemption, the Hong Kong-based ETFs allow an in-kind mechanism, enabling investors to use bitcoin or ether directly to buy or sell the ETFs.

Source : The Block / May 3, 2024