# Hong Kong Approves Bitcoin Spot ETF, Anticipates Significant Capital Inflows
Hong Kong has become the first Asian country to approve the trading of Bitcoin spot Exchange-Traded Funds (ETFs), positioning itself as a potential catalyst for the second phase of the cryptocurrency bull market. This move follows the approval of Bitcoin spot ETFs in the United States earlier this year, which marked the beginning of a significant upswing in the cryptocurrency market.
On October 16, the Hong Kong Securities and Futures Commission (SFC) approved Bitcoin and Ethereum spot ETFs from several asset management firms, including China Asset Management, Bosera Asset Management, HashKey Capital, and Harvest Global Investments. This approval makes Hong Kong the first Asian country and the fourth globally to allow such ETFs, following Germany, Canada, and the United States.
Spot ETFs are considered a major market catalyst as they can absorb significant new capital, improving market conditions by driving up demand. In the U.S., the approval of 11 Bitcoin spot ETFs in January led to an influx of approximately $59 billion. BlackRock’s iShares Bitcoin Trust alone attracted $15 billion within three months.
# Potential Inflows and Market Impact
Hong Kong’s approval of Bitcoin spot ETFs is anticipated to attract up to KRW 34 trillion ($25 billion) in new capital from mainland China and other Asian institutional investors. This inflow could mirror the significant sums drawn by their U.S counterparts.
Jeong Seok-moon, head of Presto Research Center, predicts that these Bitcoin spot ETFs listed on the Hong Kong Stock Exchange could attract $10 billion to $20 billion in their first 12 months. Cryptocurrency research firm Matrixport suggests that demand from Chinese investors could reach as high as $25 billion.
QCP Capital, a cryptocurrency trading firm based in Singapore, highlighted that the SFC’s approval provides institutional investors looking to enter the cryptocurrency market with a new, Asia-based alternative. This regional option might even surpass U.S. spot ETFs in the future, given Hong Kong’s unique advantages.
# Differentiating Factors
Two key differences may enable Hong Kong to outshine the U.S. in this market. Firstly, unlike the U.S., which has only approved Bitcoin spot ETFs, Hong Kong has given the green light to Ethereum spot ETFs as well. Secondly, Hong Kong allows for physical redemptions of these ETFs. While the U.S. only permits cash redemptions, Hong Kong’s policy of both cash and Bitcoin spot redemptions can lower trading costs and increase competitiveness.
“Hong Kong’s approval of spot exchanges for actual physical assets enhances market efficiency and addresses liquidity issues,” said Jeong. “The physical redemption process is simpler than cash redemption, reducing tax and transaction costs.”
As a result, this move is expected to enhance investment accessibility for Bitcoin and Ethereum, potentially driving a bullish market. Lucy Hu, Chief Analyst at Metalpha, a Hong Kong-based digital asset management firm, said, “The Bitcoin spot ETF in Hong Kong will not only attract new global investments but also elevate the status of digital assets.”
QCP Capital anticipates that the introduction of Hong Kong’s Bitcoin spot ETF will gradually lead to market strengthening, although they advised considering macroeconomic events which could introduce significant volatility.
Meanwhile, large-scale purchases followed swiftly after the approval. SpotOnChain reported that eight major investors bought 9,787 Ethereum worth KRW 44.1 billion ($31.88 million), responding to the ETF news.
This landmark approval by Hong Kong is expected to reshape the investment landscape for digital assets in Asia, potentially setting the stage for the next major bullish phase in the cryptocurrency market.
