Yesterday, Hong Kong’s financial watchdog approved three investment funds to launch Bitcoin spot ETFs. According to some expectations, Asian Bitcoin ETFs could attract up to $25 billion in capital.

Eric Balchunas, a well-known ETF expert, has strong doubts about this. He thinks $500 million would be a lot for Hong Kong’s Bitcoin ETFs.

Limited size of the ETF market in Hong Kong

He shared his opinion about the Hong Kong Bitcoin exchange funds via X on Monday. Although he calls the Asian ETFs good news for Bitcoin, he gives four reasons why Bitcoin investors should adjust their expectations a bit.

“Do not expect a large flow of capital.” I saw a forecast of $25 billion and that’s absurd. I think they’ll be lucky if they attract $500 million.”

According to Balchunas via X. The main reason for this is the scale of the ETF market in Hong Kong. This is much, much smaller than the American ETF market. For example, the Hong Kong ETF market is only worth $50 billion. An inflow of $25 billion therefore does not seem realistic.

The three investment funds that received the green light from the Securities and Futures Commission (SFC) are also relatively small players. Nothing compared to a financial giant such as the American Blackrock, says Balchunas.

Another factor is the high commissions charged by Hong Kong ETFs. This will probably be between 1 and 2 percent. The US Bitcoin ETFs, on the other hand, have very low commissions.

What role will Chinese investors play?

Balchunas also says that investors from mainland China cannot invest in the Hong Kong ETFs. However, this is not entirely correct. Through the Southbound Stock Connect, Chinese investors can indeed invest in select shares in Hong Kong. Depending on the scale of this, capital flows could exceed Balchunas’ low expectations.

It is not yet entirely certain when the Hong Kong Bitcoin Spot ETFs can come onto the market. According to expectations, that will be sometime next week. It will be interesting to see how the stock market funds will turn out.

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