Hong Kong's spot exchange traded funds Bitcoin and Ethereum (ETFs) could begin trading at the end of the month, the veteran analyst behind 10x Research told Decrypt.
“Although no trading date has been set yet, April 30 is expected,” said the 10x Research founder Markus Thielen. He also writes research reports for Singapore-based trading platform Matrixport and was previously its head of research and strategy.
Thielen's comments came a day after Hong Kong's decision conditional approval for a range of spot Bitcoin and Ethereum ETF Applications managed by China Asset Management, Harvest Global, Bosera and HashKey respectively.
As a result of the US approves spot Bitcoin ETFs there was one in January significant increase in demand for exposure to crypto assets, which has helped fuel the recent bull run. However, according to Thielen, the success of Hong Kong ETFs depends heavily on whether mainland Chinese investors can buy them.
The Shanghai Stock Exchange's Southbound Stock Connect enables qualified investors in mainland China to access eligible financial investments in Hong Kong. There is a daily quota of 42 billion yen for the connection to the south – if this is exceeded, business will be rejected. But in recent years this quota has not been reached.
“This program allows mainland investors to purchase up to 500 billion yen ($69 billion) of Hong Kong-listed stocks annually – or the equivalent of HK$540 billion per year,” Thielen said Decipher. “Over the past three years, the annual reserve ratio has been HK$100 billion to HK$200 billion (US$15 billion to US$25 billion).”
“If Chinese investors could buy,” he added, “mainland investors could allocate so much — as a cap.”
However, this future seems unlikely for now, as Thielen assumes that the ETFs will not become part of the Southbound program for at least six months.
“Most market participants assume that Chinese mainland investors cannot purchase these products and that they will not be included in the Southbound Connect program,” Thielen explained. “Currently, Hong Kong ETFs must have been listed for six months, but regulation can change at any time.”
However, Thielen suggested that the country could look to Bitcoin to diversify its assets due to “China’s real estate concerns” and the stock market’s decade-long weakness.
“Although there are some forms of Bitcoin activity banned in China“The ban may be primarily motivated by fear of social unrest due to fraud, illegal capital raising, etc.,” Thielen said. “A regulated product like the Bitcoin and Ether ETFs is cheaper.”
Despite China's ban on crypto trading and mining The country continues to be at the forefront of crypto conversations in 2021. In 2023, the top crypto exchange Binance was liquidated $90 billion in Chinese transactions in a single month – which accounted for 20% of Binance’s global volume at the time.
Since then, Hong Kong has positioned itself as that next crypto hub– Opening of trading for Private investors and now the approval of crypto spot ETFs – which experts said Decipher It could be that China is using the area as a “testing site”.
“Nothing happens in Hong Kong without China’s blessing – not even a drop of rain,” Thielen added. “So if the two leading financial market authorities (HKMA and SFC) approve Bitcoin and Ethereum ETFs, there must be a conscious decision and a calculation of the possible impact.”
However, Thielen pointed out that this may not be as optimistic as many crypto enthusiasts initially thought due to cultural differences in investing.
“ETFs have had limited success in Asia as investors prefer to make direct/concentrated bets rather than buying a basket of something,” he said. However, in this case, since the ETFs represent a single asset and not 10 to over 100 stocks, it is much more of a straight bet.
“Therefore, the success rate could be much higher than other basket-time ETFs,” he added.
Edited by Andrew Hayward
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.
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