Hong Kong-based Bitcoin exchange-traded funds (ETFs) have fallen far behind their U.S. counterparts in terms of performance during their first week of launch, according to data compiled by Farside Investors. The three spot Bitcoin ETFs that launched on April 30 in Hong Kong have attracted a total of $262 million in assets under management (AUM), with the majority of subscriptions occurring before the listing. However, their asset inflows in the first week amounted to less than $14 million, significantly lower than the billions that flowed into U.S. spot Bitcoin ETFs in January.
Farside Investors commented that the launch of the Bitcoin and Ethereum ETFs in Hong Kong is not as significant as the U.S. ETFs. Additionally, the spot Ether ETFs in Hong Kong, which are the first of their kind globally, have not made a strong impression, with a cumulative AUM of $54.2 million and total inflows of $9.3 million as of May 6.
The Hong Kong spot crypto ETFs were seen as improvements compared to their U.S. counterparts. They are denominated in three fiat currencies and allow investors to buy and redeem ETF units directly via Bitcoin or Ether through in-kind transfers.
Eric Balchunas, senior Bloomberg ETF analyst, noted that the Hong Kong ETFs are not expected to reach the same scale as the U.S. ETFs. However, with $310 million in AUM, the Hong Kong ETFs are equivalent to $50 billion in the U.S. market, making them as significant in their local market as the U.S. ETFs are in theirs.
The Hong Kong equities sector is relatively small, with a total market cap of $4.5 trillion compared to $50 trillion worth of listed equities across all U.S. exchanges. It is also more illiquid due to slower economic growth in Mainland China since 2022.
A study by crypto exchange OSL found that nearly 80% of crypto-savvy investors in Hong Kong plan to invest in the new spot Bitcoin and Ether ETFs. However, these assets are currently inaccessible to Mainland Chinese investors unless they possess Hong Kong residency.
Researchers at SoSoValue commented that Mainland Chinese investors are not allowed to purchase the ETFs, and incremental funds may be limited, resulting in low transaction volume. They also noted that after an initial teaser fee period, the management fees of Hong Kong crypto ETFs range from 0.85% to 1.99% annually, significantly higher than the 0.25% average annual management fees charged by U.S. issuers. SoSoValue stated that due to the fee difference, institutional investors who are optimistic about the crypto market and want to hold it for a long time would find the holding cost of the U.S. Bitcoin ETF lower.