Hong Kong Cryptocurrency ETF First Day: IOP Exceeds Expectations, Low Trading Volume, Future Outlook

May 01, 2024

Editors | Cryptocats

Harvest Global Investments and other companies submitted applications for Bitcoin spot ETFs to the Hong Kong Securities and Futures Commission as early as January 26th. On April 15th, ChinaAMC, Bosera Asset Management, and Harvest Global Investments announced that they had obtained approval from the Hong Kong Securities and Futures Commission (SFC) to issue ETF products invested in Bitcoin and Ethereum spot. On April 24th, the fund companies confirmed that the public trading date would be April 30th.

Before the market opened on April 29th, ChinaAMC expressed its confidence that the initial offering size of the Hong Kong cryptocurrency spot ETF (exceeding USD 125 million) could surpass the first-day issuance size in the United States (here, the issuance size refers to IOP, not the amount of funds flowing in on the first day). Investors from Singapore, the Middle East, and other regions have shown significant interest. Currently, mainland Chinese investors cannot invest in Hong Kong’s cryptocurrency spot ETFs, but qualified investors, institutional investors, retail investors, and qualified international investors in Hong Kong can invest in cryptocurrency spot ETFs. The U.S. classification of Ethereum as a security will not affect Hong Kong. Hong Kong has long had a clear definition of Ethereum, which is not considered a security but was one of the earliest non-security cryptocurrencies regulated in Hong Kong and can be traded by retail investors.

According to informed sources, based on current prices, the final market size of the Hong Kong cryptocurrency spot ETF is estimated to be at least $2–3 billion, although this is far below the U.S. market (currently over $50 billion), it is still higher than the earlier estimate of $500 million by U.S. analysts.

On April 30th, ChinaAMC announced that its Bitcoin spot ETF and Ethereum spot ETF had successfully launched today, with the initial offering size as follows: ChinaAMC Bitcoin ETF HKD 950 million; ChinaAMC Ethereum ETF HKD 160 million. Analysts pointed out that ChinaAMC invested heavily in the IOP distribution, while major clients of Harvest and Bosera did not subscribe during the IOP phase, and there may be additional funds entering later. HashKey Capital stated that non-residents of Hong Kong can also subscribe to or purchase ETF products if they meet local regulatory requirements, such as through customer due diligence.

One hour after the market opened, data from the Hong Kong Stock Exchange’s official website showed that the total trading volume of the first batch of 6 Bitcoin and Ethereum spot ETF funds launched in Hong Kong exceeded HKD 37 million (USD 4.73 million). At the end of the morning session, the trading volume of the six newly listed Bitcoin and Ethereum spot ETFs in Hong Kong was approximately HKD 49.4 million (approximately USD 6.3 million), with ChinaAMC Bitcoin ETF leading with a trading volume of HKD 22.97 million, followed by ChinaAMC Ethereum ETF with a trading volume of HKD 10.47 million.

At the close on the 30th, the total trading volume of the six Hong Kong’s first batch of cryptocurrency spot ETFs was approximately HKD 87.58 million (USD 12 million). In comparison, the first-day trading volume of the U.S. Bitcoin ETF reached as high as USD 4.6 billion, which is 383 times the first-day trading volume in Hong Kong. Among them, the trading volumes of ChinaAMC Bitcoin ETF (3042 HK) and ChinaAMC Ethereum ETF (3046 HK) were HKD 37.16 million and HKD 12.66 million respectively. Bosera HashKey Bitcoin ETF (3008 HK) had a trading volume of HKD 12.44 million, and Bosera HashKey Ethereum ETF (3009 HK) had a trading volume of HKD 2.48 million. The trading volume of Harvest Bitcoin Spot ETF (3439 HK) was HKD 17.89 million, and the trading volume of Harvest Ethereum Spot ETF (3179 HK) was HKD 4.95 million. At the same time, all six cryptocurrency spot ETFs fell below their opening prices at the close.

Brian Roberts, Head of Securities Products Development at HKEX, stated that before the listing of the first batch of spot ETFs, the average daily trading volume of three virtual asset futures ETFs had increased from HKD 8.9 million in 2023 to HKD 51.3 million in the first quarter of 2024 after being listed in 2022, attracting HKD 529 million in fund inflows.

CHOI Fung Yee, Christina, Executive Director of the Investment Products Division of the SFC, stated that although the cryptocurrency market has faced many uncertainties in recent years, including stablecoin collapses and the closure of trading platforms, resulting in significant losses for investors, there is still considerable demand for investment in the market. Therefore, it has decided to establish a comprehensive regulatory framework and approve regulated cryptocurrency spot ETFs for listing, believing that this is in the public interest. The approval of related ETFs for listing by the SFC does not mean that it supports or encourages the public to invest in related cryptocurrencies, and it reiterates that regulatory systems cannot eliminate various risks in the market itself, especially the high speculation and price volatility of cryptocurrencies. It reminds that only investors who can bear risks should consider it. She mentioned that the listing of cryptocurrency spot ETFs is an important milestone in the development of the ETF market in Hong Kong. With the China Securities Regulatory Commission proposing multiple measures to optimize the mutual recognition system, including expanding the scope of qualified ETF products, it is believed that it can inject new impetus into the development of Hong Kong’s financial market in the current challenging market environment, and will continue to study and promote the industry’s full utilization of relevant measures in the future.

HashKey Group stated that it will continue to purchase renewable energy certificates based on the holdings of Bosera HashKey Bitcoin ETF, allowing investors to collectively participate in “greening” actions. A dedicated “Green Bitcoin ETF” area has been set up on GreenBTCClub to offset the carbon emissions generated by the historical energy consumption of global Bitcoin mining. Investors will have the opportunity to receive unique NFT medals. GreenBTCClub is a climate action network driven by DePIN+ReFi, which practices the tokenized green certificate asset protocol deployed on arkreen for issuance and absorption on-chain.

According to PANEWS, Livio Weng of HashKey stated that for traditional investors, they can seize the current bull market represented by BTC and ETH through the funding channels and asset structure advantages of ETFs to increase their assets. For Web3 native users, purchasing spot ETFs is essentially a form of “TradFi mining,” “mining” the value and potential of traditional markets and assets. For example, users in Hong Kong who already hold BTC and ETH can turn their original “alternative assets” into “mainstream assets” through IN-Kind (physical) methods, which can attract more Web3 native users to stay in Hong Kong.

However, according to Tencent News “Qianwang”, there are not many investors who have subscribed through Victory Securities for physical purchases in the past few days. Some native cryptocurrency investors have not rushed to deposit funds and place orders after opening accounts with Victory Securities. In addition, the current physical subscription and redemption at Victory Securities are still not convenient enough, with orders and confirmations being made by email or phone. It is expected that all parties will further coordinate in the next stage, particularly in terms of processes and customer integration.

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