Hong Kong’s Bitcoin, Ethereum ETFs projected to hit $1 billion in assets within two years

Bloomberg analysts have revised previous inflow predictions for Hong Kong’s newly approved Bitcoin and Ethereum exchange-traded funds (ETFs) to $1 billion within the first two years.

Bloomberg senior ETF analyst Eric Balchunas had previously estimated the funds to garner roughly $500 million in inflows over a similar period due to doubts over Chinese investor eligibility and a lack of maturity in the Hong Kong ETF market.

Chinese investors exposure

Eric Balchunas, Bloomberg’s senior ETF analyst, highlighted the challenge faced by Chinese investors seeking exposure to newly approved ETFs in Hong Kong.

Citing a research note from colleague Rebecca Sin, Balchunas emphasized that China’s ban on the underlying assets related to these ETFs complicates accessibility for interested investors within the jurisdiction.

China has long upheld strict regulations on the burgeoning crypto sector. The country initially banned cryptocurrencies in 2013 and extended the restrictions to mining in 2021.

Moreover, Sin’s analysis noted that retail Chinese investors might attempt to bypass this restriction by leveraging the $50,000 remittance quota to invest in these ETFs.

However, the feasibility of this investment route remains uncertain due to its limited functionality and the potential regulatory hurdles that might emerge for institutional investors.

AUM to hit $1 billion

While these restrictions pose a significant challenge for the Hong Kong-listed crypto ETFs, analysts still foresee them attracting substantial interest and predict they will hit $1 billion in assets under management (AUM) within the first two years.

Balchunas explained that the $1 billion milestone relies on significant enhancements in Hong Kong’s financial infrastructure and ecosystem.

Presently, Bitcoin ETFs in the Asia-Pacific region command $250 million in AUM, distributed across five ETFs, three based in Hong Kong and two in Australia. The largest fund, the CSOP Bitcoin Futures ETF listed in Hong Kong, boasts $121 million in AUM.

Among the three firms poised to introduce spot ETFs, Bosera and Harvest collectively manage $50 million across nine ETFs. In contrast, ChinaAMC, with 15 ETFs and $3.6 billion AUM, is a significant player expected to have a considerable impact upon launching its spot crypto ETFs.

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