May 23, 2024
Hong Kong Bitcoin ETF Approval, Praise and Caution
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Hong Kong Bitcoin ETF Approval: Praise and Caution

The long-awaited approval of spot Bitcoin exchange-traded funds (ETFs) in Hong Kong marks a significant milestone in the industry, according to some experts. However, concerns about broader market forces, including persistent inflation and geopolitical risks, loom over the bullish event.

Livio Wang, chief operating officer of Hong Kong-based HashKey Group, expressed excitement about the launch of Asia’s first Bitcoin spot ETF and the world’s first Ethereum spot ETF. Wang sees this development as a historic moment for traditional financial institutions in Hong Kong, providing retail users with a more accessible gateway to purchase cryptocurrencies.

Unique Features of Hong Kong Spot Bitcoin ETFs

Unlike U.S. spot Bitcoin ETFs approved in January, Hong Kong spot Bitcoin ETFs offer several unique features. Wang highlighted features such as subscription and redemption via fiat money, Bitcoin, and stablecoins. Additionally, Wang praised Hong Kong regulators for approving a spot Ether (ETH) ETF, which faced greater regulatory hurdles in the U.S.

Patrick Pan, CEO and chairman of OSL Exchange, anticipates that the initiation of these ETFs will significantly increase capital inflow into the digital asset market in Hong Kong. Pan also commended Hong Kong spot ETFs for allowing in-kind settlement, which ensures uninterrupted trading flows and enhanced market liquidity.

Optimism from Crypto Exchange eToro

Crypto exchange eToro views the approval of Hong Kong spot ETFs positively, positioning Hong Kong as a rising crypto hub in Asia. The Exchange believes this development could pave the way for other neighboring countries and jurisdictions to introduce their ETFs.

However, eToro also acknowledges the focus shifting to Bitcoin’s Halving event following the Hong Kong ETF news. The exchange wonders whether Bitcoin’s price will rally to new all-time highs due to the immediate supply shock from the halving or experience a sell-the-news event, similar to the Bitcoin spot ETF approval earlier this year.

“More potential investors and integrations into the traditional financial system could bode well for the bitcoin price.”

Differing Perspectives on Hong Kong Spot Bitcoin ETFs

Eric Balchunas, a Bloomberg ETF analyst, points out that mainland China investors may not be eligible to buy Hong Kong-listed spot Bitcoin and Ether ETFs due to restrictions on purchasing virtual assets. As a result, Balchunas predicts that Hong Kong spot Bitcoin ETFs will attract significantly less capital compared to U.S. spot Bitcoin ETFs.

Source: Eric Balchunas (X).

Markus Thielen, founder of Singaporean blockchain analytics firm 10x Research, expressed caution by selling all assets the day after Hong Kong spot ETFs were approved. Thielen believes that risk assets, including stocks and crypto, are on the verge of a significant price correction. Bitcoin’s recent price decline, exacerbated by escalating tensions in the Middle East, underscores Thielen’s concerns adding:

“The primary trigger is the unexpected and persistent inflation. With the bond market now projecting less than three cuts and 10-year Treasury Yields surpassing 4.50%, we may have arrived at a crucial tipping point for risk assets.”

Bitcoin’s Price Performance and Market Dynamics

Bitcoin has experienced a nearly 20% decline in value since reaching its all-time high of $73,750 per coin last month. The digital asset suffered a notable drop on April 13 due to escalating tensions in the Middle East, highlighting the impact of geopolitical factors on cryptocurrency markets.

Image by lifeforstock on Freepik

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