Original author: Weilin, PANews
Since the listing of 6 virtual asset ETFs in Hong Kong on April 30th, it has been a month and a half, and the market is still in a period of adjustment. On one hand, traditional banks have not yet distributed these virtual asset ETFs, while on the other hand, some securities firms are actively promoting their layout. For example, Victory Securities’ VictoryX trading APP has already opened access to USDT and USDC for professional investors.
In terms of market trading volume performance, data from SoSo Value shows that during this period, the average daily total trading volume of Hong Kong BTC spot ETF was $4.32 million, reaching a historical high of $11.49 million on June 11th. The average daily total trading volume of the Hong Kong ETH spot ETF was $1.43 million, with the highest point appearing on May 27th at $4.40 million.
According to industry experts, the trading volume and scale trends of Hong Kong virtual asset ETFs are inverted, and various stakeholders are “making up classes” due to the early approval of ETFs, with different institutions adjusting and clearing bottlenecks between them. Two months later, perhaps the key point of volume will be reached.
After being listed for a month and a half, how have the 6 virtual asset ETFs in Hong Kong performed?
According to public data, the initial issuance scale of 3 Bitcoin spot ETFs in Hong Kong reached $248 million on April 30th (Ethereum spot ETF was $45 million), far exceeding the initial issuance scale of the US Bitcoin spot ETF of approximately $125 million on January 10th (excluding Grayscale), indicating high market expectations for the subsequent performance of Hong Kong crypto ETFs.
In terms of the initial trading volume, the market’s criticism of these 6 Hong Kong crypto ETFs is focused on their relatively “dull” performance compared to US crypto ETFs: on the first day of listing, the total trading volume of the 6 crypto ETFs in Hong Kong was $87.58 million (approximately $11.20 million), with three Bitcoin ETFs trading volume at $67.50 million, which is less than 1% of the total trading volume on the first day of the US Bitcoin spot ETF ($4.6 billion).
According to SoSo Value’s data, as of June 13th, the total Bitcoin holdings of Hong Kong ETFs were 4,070 coins, with total net assets of $275 million. In the case of the Ethereum spot ETF, the total ETH holdings of Hong Kong ETFs were 14,030.
Looking at the situation over the past month, in terms of the daily total trading volume of the Hong Kong BTC spot ETF, the total trading volume on June 11th reached $11.49 million, hitting a historical high, but quickly falling in the following two days. Since listing, the average daily total trading volume was $4.32 million. During this period, the average daily total trading volume of the US Bitcoin ETF was $1.965 billion.
While the highest daily total trading volume of the Hong Kong ETH spot ETF occurred on May 27th at $4.40 million. Since listing, the average daily total trading volume was $1.43 million.
Traditional banks have not yet distributed, two months later may be the key to volume
However, despite the listing of Hong Kong virtual asset spot ETFs for over a month, banks have not yet launched them. Chris Barford, Managing Director of Data and Analysis at EY Hong Kong Financial Services, told the media that traditional banks are cautious about distributing products due to anti-money laundering and know-your-customer (KYC) regulatory risks.
Some issuers admitted that banks and securities firms are subject to different regulatory bodies, and distribution through banks may require waiting for approval from the relevant regulatory body, and internal evaluation within the bank may take time. Barford explained that talent shortage is a major challenge, with global markets facing a shortage of talent familiar with decentralized ledgers and virtual assets, combined with financial services and regulatory knowledge. In order to accept these products, they must meet the risk control level of traditional banks or financial institutions.
At the same time, as traditional financial institutions, some Hong Kong securities firms are laying out to provide trading services for virtual assets such as Bitcoin.
For example, Victory Securities, Tiger Securities, and Interactive Brokers in Hong Kong have all launched corresponding services, allowing investors to trade Bitcoin and other virtual assets on the securities APP. According to Securities China, some securities firms have stated that revenue related to virtual assets may account for about a quarter of the company’s income. Although many securities firms support the purchase of the above ETF products, some larger-scale securities firms, also out of regulatory considerations, do not actively recommend virtual asset ETFs to customers.
On May 6th, Tiger Securities (Hong Kong) announced the official launch of virtual asset trading services, supporting 18 currencies including Bitcoin and Ethereum, becoming one of the first online securities firms in Hong Kong to support securities and virtual asset trading on a single platform. On June 17th, Tiger Securities (Hong Kong) announced that it had obtained approval from the Hong Kong Securities and Futures Commission to upgrade its license, officially expanding the service to retail investors in Hong Kong. Currently, retail investors in Hong Kong can invest in various global assets including Bitcoin, Ethereum, stocks, options, futures, US bonds, and funds through Tiger Securities’ flagship platform Tiger Trade, at a cost-effective one-stop trading platform, seamlessly managing virtual assets and traditional financial assets.
In addition, on November 24th last year, Victory Securities in Hong Kong announced that it became the first licensed corporation in Hong Kong to provide virtual asset trading and advisory services to retail investors approved by the Securities and Futures Commission. Also on November 24th last year, Interactive Brokers in Hong Kong obtained permission for retail clients to trade virtual assets, allowing trading of Bitcoin and Ethereum.
Investors who want to trade Bitcoin and other virtual assets on the securities APP need to open a virtual asset account. Securities have set a low entry threshold for trading virtual assets, starting at $100.
Jupiter Zheng, Partner of Hashkey Capital’s secondary fund, recently wrote that the trading volume and scale trends of Hong Kong virtual asset ETFs are inverted. This actually reflects a kind of “structural” undercurrent – various stakeholders are polishing processes and clearing bottlenecks due to the early approval of ETFs. Especially for physical subscriptions and redemptions, it requires coordination and clearing of bottlenecks between different institutions such as processes, Authorized Participants (PDs), securities firms, custodians/exchanges, and market makers. Two months later, perhaps the key point of volume will be reached.
Furthermore, the key force for the future scale of Hong Kong virtual asset ETFs comes from institutional investors. An EY survey found that many institutional investors expect to increase their allocation to virtual assets in the next 2 to 3 years. If managing assets exceed $500 billion, most will invest about 1% of their assets in some form of virtual currency, and most family offices also have a stake in virtual currencies. Large investors believe that virtual assets may outperform the market in terms of returns in the future, but value fluctuates. If they can manage this risk, virtual assets will be an attractive asset class.
Looking ahead, although the performance of Hong Kong virtual asset ETFs still needs improvement, with more securities firms offering related services, the possibility of bank distribution increasing, and institutional investors’ growing interest in virtual assets, the market potential of Hong Kong virtual asset ETFs is still worth looking forward to.
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