In Hong Kong, the recent green light for three new Bitcoin and Ether ETFs has stirred up excitement among crypto enthusiasts. However, senior Bloomberg ETF analyst Eric Balchunas advises against getting too carried away with expectations.
In a recent post, Balchunas suggests that the hype around these ETFs may be overblown. Contrary to optimistic projections of $25 billion inflows, “Don’t expect a lot of flows — I saw one estimate of $25b that’s insane. We think they’ll be lucky to get $500m.”
Firstly, the Hong Kong ETF market is relatively small compared to major players like the US. Additionally, these ETFs are not accessible to Chinese retail investors, limiting their potential reach.
So, while the approval of these ETFs marks a significant milestone for the crypto world, Balchunas urges caution and suggests that the impact may not be as monumental as some anticipate.
Balchunas noted these three prospective ETF issuers were tiny relative to “big fish” asset management giants such as BlackRock — which currently boasts more than $9 trillion in assets under management.
“U.S. spot bitcoin ETFs have more assets than the entire HK ETF market,” wrote Balchunas in a follow-up post to X.
Balchunas highlights the less efficient capital environment and higher fees for Hong Kong’s new Bitcoin and Ether ETFs, contrasting them with the cost-effective U.S. market. He anticipates wider spreads and premium discounts due to liquidity issues.
Despite this, Jamie Coutts views the ETFs as a gateway to a vast capital pool for Chinese investors adept at navigating capital controls. Notably, Hong Kong’s FSC approved these ETFs to use an in-kind model, allowing direct issuance of ETF shares with BTC and ETH.
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