Spot exchange-traded funds (ETFs) connected to virtual assets saw a spike in trading volumes in Hong Kong. The granting of the license from the Hong Kong SFC has brought about some hope. Nonetheless, a host of other difficulties stand in the way.
Strong initial trading volumes reflect Hong Kong’s investor enthusiasm
ETF trading volumes featuring virtual assets in Hong Kong displayed the commencement in a sound way as the overall trading volume increased to HK$48.91 million. During the day, Bitcoin ETF continued to be the ruler with the sum amount of HK$43.41 million, while Ethereum ETF conquered second place with HK$5.5 million. However, this increased volume of trading highlights greater interest in the virtual gold rush within the Hong Kong market.
Despite the cautious approach, experts acknowledge that the ongoing regulatory and market challenges still remain which may hinder the technological progress since the digital transformation of the financial sector has had a significant impact on several aspects of our lives.
While the green-light of virtual asset ETFs was well received the remain worry is about the prospects of such products. In a way, crypto-ETFs can be seen as a huge step forward, but for longer-term investors, they might still be a bit skeptical. Eric Balchunas, who is the Senior ETF Analyst of Bloomberg, suggests that there will moderate inflows of around $500 million into this market, which reflects the trouble that Hong Kong is having to reach the size of its American competitors.
Market size and governmental regulation as a resistance
Analysts provide various justifications for placing conservative estimates. Against the backdrop of the US market of $15 trillion, Hong Kong ETF, at $50 billion in value, is not that large. In addition, impediments of control imposed by the Chinese regulators on their local citizens in the stipulation for these ETFs demand limit their desires for purchase.prominent players such as BlackRock which are absent in the Hong Kong ETF market support the invests of larger sizes.
there are plans that the infrastructure of the Hong Kong market is yet to be equitable and efficient similar to the substitute US market. Unrelated to this, we realize that this inefficiency causes premium discounts and wider spreads for exchange-traded funds which can possibly cause accomplished investors who are already accustomed to the convenience of the US market to lose interest.
If another reason is to be added, the higher fees are also contributing to the low estimate for the ETF investment, but it may be between 1%~2%. If investors who are used to paying for low-cost securities in the US fees are options, this can be a turn-off. As per Balchunas
Implications for the future
the success of virtual asset ETFs in Hong Kong can only be assessed in the long run. The initial numbers of trading volumes may indicate their promising future for the region, however, the comparison with the scale and dominance of the US virtual asset ETFs may give a clearer perspective of whether Hong Kong can match up to their American counterparts. The initial fruitful stream submission is a tell-tale sign of the rising eagerness for virtual assets investment in the area.
Hong Kong’s crypto ETFs immediately receive robust trading volumes upon their launch underlines the challenge ahead of the industry as it strives to solidify itself as a highly competitive player in a crowded international space.
