Hong Kong crypto ETFs will be 'lucky' to attract $500 million in total AUM: analyst

Bloomberg Senior ETF Analyst Eric Balchunas threw a bit of cold water on the excitement surrounding Hong Kong's approval on Monday of applications for spot bitcoin and ether exchange-traded funds.

Since spot bitcoin ETFs started trading in the U.S. in January, the funds collectively have generated more than $200 billion in trading volumes. The funds issued by financial giants like BlackRock and Fidelity, which started with zero assets under management, have attracted about $30 billion in fresh capital combined.

Balchunas took to X on Monday in an effort set expectations about the Hong Kong market. "Don't expect a lot of flows ... we think they'll be lucky to get $500 million," he said, adding that the Hong Kong ETF market is "tiny" and "Chinese locals cannot buy these, at least officially."

In this case, a notable distinction between the U.S. and Hong Kong markets is that the latter has approved spot ether ETFs. Balchunas clarified that his prediction of $500 million in total assets under management covers both Hong Kong's bitcoin and ether ETFs.

In the U.S., the Securities and Exchange Commission is expected to rule by the end of next month on whether to approve Ethereum ETH +1.82% -based spot ETFs. Recently, optimism waned among some market watchers, including fellow Bloomberg Intelligence analyst James Seyffart, who has said the new ETFs will likely be denied.

 

The financial institutions that won ETF approvals in Hong Kong include China Asset Management, Harvest Global, Bosera and HashKey. Balchunas noted that no big players like BlackRock are yet involved.

However, he also tried to clarify that his sentiments should not be construed as bearish. "All this is clearly positive for bitcoin as it opens up more avenues to invest, I'm just saying its child's play" compared to the U.S. market. "The underlying ecosystem there is less liquid/efficient," Balchunas said, adding that "these ETFs will likely see wide spreads and premium discounts ...nowhere near the dirt cheap fees in the U.S."

Whereas BlackRock has been charging a sponsor fee of 0.25%, Balchunas said he expects the Hong Kong instruments to charge between $1—$2 %. It is not yet known when the products in Hong Kong might launch.