Hong Kong Crypto ETFs Lag Behind US Counterparts

Hong Kong's crypto ETFs have underperformed, failing to match the success of US-based spot ETFs, which currently hold $55 billion. Despite initial excitement, Hong Kong's debut in the crypto ETF market has been disappointing. According to Bloomberg, six Bitcoin and Ether ETFs in Hong Kong saw a $25 million drop in inflows, falling from an initial $293 million.

US-based spot ETFs have thrived, reaching $12.1 billion in net inflows and holding $55 billion in total. This success highlights the challenges Hong Kong faces in competing with the US in the crypto trading sector.

Hong Kong's smaller trading sector struggles compared to the US. Authorities hoped that crypto ETFs would boost trading activity and attract market makers. The city aims to compete with crypto hubs like Singapore and Dubai and restore its image as a dynamic financial center. Interestingly, Beijing seems indifferent to Hong Kong's crypto push despite banning crypto trading in mainland China.

Le Shi, head of trading at Auros, attributes the lukewarm reception of Hong Kong's crypto ETFs to two main factors: being outpaced by the US and uncertainty about China's stance on crypto. This has made potential investors cautious.

Local launches by Harvest Global Investments and a consortium including HashKey Capital and Bosera Asset Management on April 30 didn't help either. These funds are not accessible to mainland Chinese investors, and it remains uncertain if this will change.

Bloomberg Intelligence ETF analyst Rebecca Sin sees some positive signs. With total assets over $250 million, there is potential for growth. Sin expects more issuers to enter the market, projecting these ETFs to reach $1 billion within two years.

Despite a shaky start, Hong Kong's crypto ETF market has potential. The city faces significant challenges but could establish itself as a key player in the global digital asset market if these obstacles are overcome.