"Mainland Chinese Investors Cannot Trade" Shakes the Market! Major Signal: Hong Kong's Bitcoin Spot ETF Trading Struggles to Match the US

On Tuesday morning (April 30th), during the early Asian market hours, according to data from the Hong Kong Stock Exchange, six newly listed Bitcoin and Ethereum spot ETFs had a trading volume of 49.4 million HKD, equivalent to about $6.3 million. The prohibition of trading by mainland Chinese investors impacted the demand. On the first trading day of 11 Bitcoin Spot ETFs in the US, the trading volume reached $4.6 billion.

Wu from Blockchain Reports noted that among all the Hong Kong Bitcoin Spot ETFs, the Huaxia Bitcoin Spot ETF was the most prominent, with a trading volume reaching 22.97 million HKD during the early Asian market hours on Tuesday, followed closely by the Huaxia Ethereum Spot ETF, which reached 10.47 million HKD.

As of April 29th, the initial scale of the Huaxia Bitcoin and Ethereum Spot ETFs was 950 million HKD and 160 million HKD, respectively.

According to an official tweet from HashKey, non-Hong Kong residents who meet local regulatory requirements, such as completing customer due diligence, can also subscribe to or purchase Bosera HashKey Bitcoin and Ethereum Spot ETF products.

The Hong Kong Securities and Futures Commission stated that while it recognizes the listing of regulated virtual asset spot ETFs, this does not imply support or encouragement for public investment.

At the listing ceremony of the virtual asset spot ETFs, the executive director of the investment products division of the Securities and Futures Commission, Cai Fengyi, reiterated that the regulatory system cannot eliminate the various risks inherent in the market, particularly pointing out the speculative nature and significant price volatility of virtual assets.

Cai Fengyi emphasized that only investors who can withstand these risks should consider participating.

Additionally, she stated that the listing of virtual asset ETFs is an important milestone in the development of the Hong Kong ETF market, reflecting the market's demand for such products.

The launch of the Hong Kong Bitcoin Spot ETF seems to struggle to match the U.S. Bitcoin Spot ETFs.

After the U.S. approved the world's first Bitcoin Spot ETFs on January 11th this year, the managed scale of these ETFs has since approached $58.9 billion. Given the smaller scale of the Hong Kong ETF market, Bloomberg ETF analyst Eric Balchunas previously predicted that the capital inflow into Hong Kong's Bitcoin Spot ETF could only reach $500 million.

Bloomberg's chief ETF analyst for Asia-Pacific, Sin Sujun, estimated that the asset management scale of Hong Kong's Bitcoin and Ethereum Spot ETFs could reach $1 billion, but whether this target can be achieved may depend on the speed of improvement in infrastructure and ecosystem.

He explained that there is strong ETF demand from both retail and institutional investors in Hong Kong, who are interested in virtual assets. However, the innovative nature of cryptocurrency ETFs means that the infrastructure for such ETFs still needs time to mature. Once the ETF ecosystem develops, market competition will intensify, capital flows may increase, pricing will become more precise, spreads will narrow, and liquidity will increase, leading to lower fees.

What are the differences between the six Bitcoin and Ethereum Spot ETFs in Hong Kong?

Huaxia (Hong Kong), Bosera International, and Jishi International each issued two products: a Bitcoin Spot ETF and an Ethereum Spot ETF. According to news from China Fund at the beginning of the week, these six ETFs differ slightly in terms of management fees, trading, issue price, and virtual asset platforms.

Management Fees

Jishi's Bitcoin and Ethereum Spot ETFs charge an annual management fee of 0.3% of the net asset value, exempt for the first six months from the listing date;

Bosera's Bitcoin and Ethereum Spot ETFs charge an annual management fee of 0.6% of the net asset value, temporarily waived from the listing date of April 30, 2024, until August 2024;

Huaxia's Bitcoin and Ethereum Spot ETFs charge an annual management fee of 0.99%.

Issue Price

The issue price per share for products under Jishi International and Huaxia (Hong Kong) is 1 USD;

The initial issue price for Bosera's Bitcoin and Ethereum Spot ETFs was roughly consistent with the tracking index on April 26, 2024, at 1/10000 and 1/1000 of a Bitcoin and an Ethereum, respectively, meaning that holding 10,000 shares is approximately equal to one Bitcoin, and 1,000 shares are approximately equal to one Ethereum.

Trading Units

Jishi International's Bitcoin and Ethereum Spot ETFs require a minimum of 100,000 shares (or multiples thereof) for primary market applications, with a minimum trading unit of 100 shares in the secondary market;

Bosera's Bitcoin Spot ETF requires a minimum of 50,000 shares (or multiples thereof) for primary market applications, with a minimum trading unit of 10 shares in the secondary market, and the Ethereum Spot ETF requires a minimum of 100,000 shares (or multiples thereof) in the primary market, with a minimum trading unit also of 10 shares.

Additionally, compared to the products of Jishi International and Bosera International, Huaxia (Hong Kong)'s Bitcoin and Ethereum Spot ETFs also have a Renminbi counter.

In terms of cooperation with virtual asset platforms, Jishi and Huaxia's products have chosen OSL as their virtual asset trading and custody partner, while Bosera's products are supported by the cryptocurrency exchange HashKey Exchange, covering trading, custody, and other aspects.