Two new Bitcoin (BTC) exchange-traded funds (ETFs) debuted in Australia in June, closely following the launch of six Bitcoin and Ethereum (ETH) ETFs in Hong Kong at the end of April. This surge marks a significant stride in the emerging crypto ETF market, where Australia and Hong Kong are currently the frontrunners competing for market dominance.
Monochrome Asset Management took the lead by launching Australia’s first direct Bitcoin ETF on June 4 through Cboe. Shortly thereafter, VanEck introduced its own ETF as a sub-fund of its U.S. counterpart on the Australian Securities Exchange (ASX) on June 20. Other firms are also in the process of filing applications.
These ETFs are available on international exchanges, enhancing accessibility depending on the platform used. However, the primary focus remains on capturing the Asian market, which holds the greatest potential.
Both Australian and Hong Kong ETF providers have expansive long-term plans. Monochrome, for instance, eyes broader Asian markets where standalone products might not attract sufficient volume from local institutions. In contrast, Hong Kong aims to penetrate mainland China’s substantial market.
Being first to market grants these providers an initial advantage, likely securing their dominance in the near term. Singapore currently sidelines itself from this competition, while Japan and South Korea may soon join pending regulatory approvals, though Korea’s strict capital controls limit its potential.
Local accumulation of assets is the immediate goal for both markets. Yet, the path to substantial asset growth will likely be longer compared to the rapid uptake seen by U.S. counterparts, which managed $4.6 billion in trading on their debut and now manage nearly $30 billion in assets.
Despite pre-launch excitement, Hong Kong’s ETF market hasn’t matched initial expectations, reflecting lingering hesitancy toward ETFs compared to the robust U.S. market. Across seven leading APAC markets, ETF assets under management (AUM) represent a mere 4% of total market cap, contrasting with 16% in the U.S.
Japan and Australia exhibit stronger ETF preferences, with AUM accounting for approximately 9% and 7% of their respective market caps. In Hong Kong, ETF AUM comprises just 1% of the total market cap. Nevertheless, predictions from CF Benchmarks foresee Hong Kong’s crypto ETF AUM reaching $1 billion by the end of 2024.
The structural differences between Hong Kong and Australia’s crypto ETF markets reflect regional specifics. Hong Kong, a global financial hub, targets institutional investors with fewer regulated exchanges, catalyzed by regulator-led initiatives promoting Web3 and crypto investments.
Conversely, Australia’s market, though smaller, shows greater overall ETF enthusiasm with a diverse investor base that includes retail and institutional players, as well as fintech innovators and gaming companies. Regulatory attitudes in Australia are more reactive, focusing on meeting market demand and ensuring regulatory clarity.
Monochrome’s strategic position as Australia’s sole spot Bitcoin ETF provider positions it to potentially expand into other regional markets using its ETF model under ASIC’s regulatory framework.
Hong Kong’s prospective integration of crypto ETFs into the Hong Kong China Stock Connect could redefine its market dynamics, potentially attracting more providers and expanding competition.
In conclusion, the launch of these ETFs marks a pivotal moment driving innovation and market differentiation. As the market evolves, lessons from these developments will shape future strategies and regulatory frameworks.