Hong Kong Crypto ETFs Flop: Investors Face 20% Loss

• US crypto ETF success has set a high bar to follow.
• HK crypto ETFs lag significantly behind their US counterparts. 
• Investor preferences play a role in the disparity between US and HK markets.

The January launch of spot Bitcoin ETFs marked a significant step toward legitimizing cryptocurrency as a mainstream financial asset. Hong Kong (HK) quickly followed suit, approving crypto ETF products in April, hoping to mirror the success seen in the US market.

Despite early optimism, HK’s crypto ETFs have struggled to gain traction, with investor interest remaining lukewarm. Those who did invest face negative returns, while inflows stay stubbornly low. This has raised questions about why these products have yet to build momentum.

HK Crypto ETFs Falter

Crypto ETFs launched in HK in April with high expectations following the success of similar US products. However, nearly six months later, the HK market has struggled to gain traction as negative returns and low inflows dampen investor interest.

Data from SoSoValue revealed that HK’s Bitcoin and Ethereum ETFs have struggled to attract significant inflows since April. The three Bitcoin funds have collectively garnered only 570 BTC , while the Ethereum funds have accumulated just 270 ETH during this period.

To make matters worse, all six crypto ETFs posted negative returns by August. The Bosera HashKey Bitcoin ETF fared best at -4.7%, while the Bosera HashKey Ether ETF struggled, losing 20.9%.

Meanwhile, US Bitcoin ETFs have seen significant inflows totaling $16.9 billion, highlighting the disparity between the two markets. This stark difference has prompted analysts to examine the reasons behind HK’s crypto ETF woes.

Factors Holding Back HK ETFs

The poor price performance of HK crypto ETFs can be attributed to the timing of their launch. Most of Bitcoin’s gains for the year occurred in Q1 before the ETFs debuted. Since peaking in March, Bitcoin has been trending lower, influenced by geopolitical and macroeconomic headwinds.

A report by DBS Group Holdings noted that uncertainty surrounding the US election could be impacting the uptake of crypto ETFs in HK. With cryptocurrency becoming a campaign topic, investors in HK are unsure how the election results might affect the crypto sector post-election.

Bartosz Lipinski, Cube.Exchange CEO, stated that many Hong Kong investors prefer to hold Bitcoin or Ethereum directly rather than through ETFs. Lipinski explained that local investors aim to avoid management fees and retain control over their assets, which has limited the appeal of ETF products.

On the Flipside

• The US spot ETH ETFs have seen negative cumulative net inflows of $573.5 million.
• Despite the current challenges, introducing crypto ETFs in HK demonstrates the jurisdiction’s commitment to financial innovation.
• The Hong Kong Stock Market has fallen sharply since January 2018, likely dampening investor sentiment.

Why This Matters

The lackluster performance of HK crypto ETFs signals a broader disconnect between Western and Eastern investor appetites for regulated crypto products.

US Bitcoin ETFs come under pressure from macroeconomic headwinds.
Bitcoin ETFs Extend Outflow Streak with $169.7M as BTC Trades Below $55K

The NoOnes exchange lists Monero, ZCash against FATF recommendations. 
Crypto Exchange NoOnes Defies Feds by Listing Privacy Coins