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 now opened up deposit and withdrawal functions for professional investors with USDT and USDC.
In terms of market trading volume performance, data from SoSo Value shows that during this period, the average daily total trading volume of the 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 occurring on May 27th at $4.40 million.
Industry experts have analyzed that the trading volume and scale trends of Hong Kong virtual asset ETFs are inverted. Relevant parties are making adjustments due to the early approval of ETFs, with different institutions working to smooth out any issues. It may be two months later when the key point of trading volume is reached.
How have the 6 virtual asset ETFs performed after listing for a month and a half?
According to public data, the three Bitcoin spot ETFs in Hong Kong had an initial issuance scale of $248 million on April 30th (with the Ethereum spot ETF at $45 million), far exceeding the initial issuance scale of the US Bitcoin spot ETF of about $125 million on January 10th (excluding Grayscale). This indicates that the market has high expectations for the subsequent performance of Hong Kong’s crypto ETFs.
Looking at the initial trading volume, the market’s criticism of these 6 Hong Kong crypto ETFs is mainly focused on their relatively “poor” performance compared to the 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 (about $11.20 million), with three Bitcoin ETFs trading volume at $67.50 million, still less than 1% of the total trading volume of the US Bitcoin spot ETF on its first day ($4.6 billion).
According to SoSo Value’s data, as of June 13th, the Hong Kong ETF Bitcoin holdings totaled 4,070 coins, with total net assets of $275 million. As for the Ethereum spot ETF, the Hong Kong ETF had a total of 14,030 ETH holdings.
Looking at the situation over a month, in terms of the daily total trading volume of the Hong Kong BTC spot ETF, the daily total trading volume reached $11.49 million on June 11th, hitting a historical high, but quickly dropping in the following 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.
Data: SoSo Value, CoinGecko
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.
Data: SoSo Value, CoinGecko
Traditional banks have yet to distribute, two months later may be the key for trading volume
However, despite the Hong Kong virtual asset spot ETFs being listed for over a month, banks have not yet added them to their shelves. Chris Barford, Head of Data and Analysis for Financial Services at EY Hong Kong, 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 have admitted that banks and securities firms are subject to different regulatory bodies, so distribution through banks may require approval from the relevant regulatory bodies, and internal evaluations may take time. Barford explained that talent shortage is a major challenge, as the global market is facing a shortage of talent familiar with decentralized ledgers and virtual assets, combined with financial services and regulatory knowledge. To fully accept these products, they need to meet the risk control standards of traditional banks or financial institutions.
At the same time, as traditional financial institutions, some securities firms in Hong Kong are expanding their services to provide trading services for cryptocurrencies like Bitcoin.
Securities firms such as Victory Securities, Tiger Securities, and Interactive Brokers in Hong Kong have all launched corresponding services, allowing investors to trade cryptocurrencies like Bitcoin on their apps. According to Securities Times, some securities firms have stated that revenue related to virtual assets could account for about a quarter of their total income. Although many securities firms support the purchase of ETF products mentioned above, some larger-scale securities firms are also cautious due to regulatory considerations and do not actively recommend virtual asset ETFs to clients.
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 simultaneously 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 trade various global assets, including Bitcoin and Ethereum, as well as stocks, options, futures, US Treasury bonds, and funds, seamlessly managing virtual assets alongside traditional financial assets on Tiger Trade, the flagship platform of Tiger Securities.
Additionally, on November 24th last year, Victory Securities in Hong Kong announced that it became the first licensed corporation in Hong Kong approved by the SFC to provide virtual asset trading and advisory services to retail investors. Similarly, on November 24th last year, Interactive Brokers in Hong Kong also received approval to allow retail clients to trade Bitcoin and Ethereum.
Investors looking to trade cryptocurrencies like Bitcoin on securities firms’ apps need to open a virtual asset account. Securities firms 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 of Hong Kong’s virtual asset ETFs are inverted. This reflects a “structural” undercurrent – various stakeholders are refining processes and smoothing out issues. In particular, for physical redemption and subscription, it requires coordination between different institutions such as process facilitators (PDs), securities firms, custodians/exchanges, market makers, etc. Two months later may be the key point for trading volume.
Furthermore, the key force driving the scale of Hong Kong’s virtual asset ETFs in the future 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 exceeding $500 billion, most will invest about 1% of their assets in some form of virtual currency, and many family offices also have exposure to virtual currencies. Large investors believe that virtual assets may outperform the market in terms of returns in the near future, but with volatility in value. If they can manage this risk, virtual assets become an attractive asset class.
Looking ahead, although the current performance of Hong Kong’s virtual asset ETFs still needs improvement, with more securities firms offering related services, increased potential for bank distribution, and growing interest from institutional investors in virtual assets, the market potential for Hong Kong’s virtual asset ETFs is still promising.
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