As the excitement surrounding the launch of spot Ethereum and Bitcoin ETFs in the United States continues to grow, Hong Kong has begun its journey to establish an ETF market for these digital assets. However, the performance of these exchange-traded funds in Hong Kong has not matched the success seen in the US, raising questions about the underlying factors influencing this disparity.
Hong Kong’s Bitcoin ETFs Struggle Despite Strong First Launch
Hong Kong presented six virtual asset spot ETFs on April 30, first attracted significant interest with a combined issuance rate of $248 million—surpassing the nearly $125 million raised by US Bitcoin ETFs at their January launch.
However, despite this promising start, subsequent market performance has been less than optimistic. According to the latter analysis by Jason Jiang, researcher at OKG, in mid-May, the total assets under management (AUM) of six ETFs in Hong Kong reached nearly HKD 2 billion (about USD 264 million).
Although this significantly affects the local financial market of Hong Kong, it pales in comparison to the US market, where Bitcoin ETFs have approximately $51.4 billion in assets under management 9 months after their launch.
Market activities also showed signs of slowing down. Hong Kong’s total trading volume virtual asset spot ETFs exceeded HKD 520 million in the first weeks. However, daily trading prices have been falling, falling below HKD 40 million several times.
In addition, three Bitcoin ETFs experienced four consecutive days of total outflows, while the Ethereum spot ETF faced similar challenges.
Jiang argues that one of the main advantages of Hong Kong Bitcoin ETFs is their supply physical redemption. This feature it theoretically appeals to native crypto investors and Bitcoin miners. However, on-chain data suggests that miners are currently hesitant to get involved, preferring to monitor the market instead.
This cautious approach is reflected in the decline in miners’ wallet balances, which have reached a six-month low. Adding to these issues, Hong Kong faces challenges in terms of fee structures, which may prevent miners from investing in the Bitcoin ETFs market.
Lack of Staking Support Hinders Ethereum ETF’s Appeal
According to Jiang’s analysis, the Ethereum spot ETF also underperformed. With only 15.11% market share and AUM At around HKD327 million, the Ethereum ETF has struggled to attract investor interest.
Recent developments, such as the development of Cancun, have not produced the expected increase in on-chain activity, and the lack of strong support for the ETF has further reduced its appeal to potential investors.
Without skill a polethe reporter notes that existing Ethereum owners may hesitate to participate, as they would lose income by subscribing to the ETF.
According to the researcher, several factors could shape the future of Hong Kong’s physical asset ETF market. Endorsement of Ethereum spot ETF based on proof that (PoS) opens the door for other mainstream tokens, such as Solana, to enter the market.
In addition, Jiang asserts that local digital asset ETFs act as a bridge, turning digital assets into traditional securities. This change would enable financial institutions to develop derivative products, such as wealth management tools, that were not previously available through Bitcoin assets alone.
At the time of writing, BTC is trading at $63,100, down 0.3% in the last 24 hours.
Featured image from DALL-E, chart from TradingView.com