- The Hong Kong spot BTC ETFs are not expected to be open to investors from mainland China, which limits the expected increase in demand in the short term.
- The approval of the ETFs is an encouraging sign that mainland Chinese restrictions on cryptocurrencies could be eased or lifted, which would greatly increase the demand for BTC in the long term.
- The approval of the ETFs also increases the likelihood of other Asian financial centers doing the same.
BTC ETF Got Approved in HK. What Next?
Financial regulators in Hong Kong have recently approved the deployment of spot ETFs for Bitcoin (BTC), marking Hong Kong as the first jurisdiction in Asia to do so.
Of course, this news has the financial world abuzz with discussions about the impact of these new ETFs on the BTC price.
The obvious reasoning is that these new ETFs will open access to a range of new investors, which will drive up the demand for BTC.
This belief is reinforced by the explosion in the price of BTC following the recent deployment of spot ETFs for BTC in the United States.
However, there is a significant gulf between the optimists and the pessimists when discussing the impact of these new ETFs.
The most optimistic estimates suggest that BTC might see an additional $25 billion in demand, while the more pessimistic estimates are expecting less than $1 billion in additional resulting demand.
Mainland Access to Hong Kong Spot BTC ETFs Determines the Impact on BTC Price
The source of the widely diverging estimates for the impact of the ETFs is due to the potential for mainland Chinese investors to be able to access these new ETFs through the Southbound Stock Connect program, which allows mainland Chinese investors to purchase securities listed in Hong Kong.
However, as of now, mainland Chinese investors are restricted from purchasing securities based on virtual currencies, and there is no indication that this will change to accommodate the launch of these new ETFs in Hong Kong.
Without the impact of mainland Chinese investors, the expectations for the increase in demand from these new ETFs are much more subdued.
The current market for long BTC futures ETFs in Hong Kong is $138 million (0.3% of the market) and $60.6 billion in the United States (0.68% of the market).
If the share of the market in Hong Kong was the same for these new spot BTC ETFs, then the additional demand for BTC would be around $311 million, given the impact of the spot BTC ETFs on the United States market.
That said, this is only an estimate based on the existing demand for futures ETFs, which might not be the same as for the new spot ETFs.
“It’s hard to know if it’s reasonable to extrapolate patterns from the U.S. to estimate Hong Kong’s adoption.”
Elisabeth Kashner, director of ETF research at FactSet, stated.
Hong Kong BTC ETFs May Lead to Mainland Deregulation and Growing Acceptance in Asia
While the short-term impact of the new ETFs is likely to be subdued, it is a strong signal for the relentless growing acceptance of BTC around the globe.
The financial regulators in Hong Kong could not have approved these new ETFs without the permission of mainland Chinese authorities, so it shows that China is not pursuing an ongoing aggressive clampdown on cryptocurrencies as it has in the past.
The mainland Chinese market for cryptocurrencies represents enormous untapped potential demand, and any sign that current restrictions will be lifted or eased is a good thing for BTC.
The Hong Kong approval of these ETFs may also encourage other Asian financial hubs to approve more BTC ETFs in an effort to stay competitive.
BTC investors are accustomed to taking the long-term view, so the news of Hong Kong BTC ETF approval is very encouraging, even if there is likely to be little impact on the short-term price of BTC.
Suchet D. Salvesen
BTC ETF Got Approved in HK. What Next? Financial regulators in Hong Kong have recently approved the deployment of spot ETFs for Bitcoin (BTC), marking Hong Kong as the first jurisdiction in Asia to do so. Of course, this news has the financial world abuzz with discussions about the impact of these new ETFs on the BTC price. The obvious reasoning is that these new ETFs will open access to a range of new investors, which will drive up the...
