Hong Kong Launches Crypto ETFs To Lackluster Trading Volumes

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To investors,

There were six new crypto ETFs that started trading in Hong Kong on Tuesday. These were the first spot bitcoin and spot ether ETFs to launch in the region, but the trading volumes were quite lackluster.

Total trading volume for the Hong Kong ETFs was slightly over $100 million. In comparison, the US debut for the bitcoin ETFs saw more than $4.5 billion in trading volume on day one earlier this year.

These new ETF launches are important to watch because Asia boasts a much larger crypto user base than any other region in the world. As Willy Woo pointed out, Asia’s user base is larger than the US and Europe combined.

On one hand, you can argue that the overall interest in crypto is higher in Asia, so there should be many more investors interested in these spot ETFs. On the other hand, you could argue that the higher amount of Asian users means that people in the region have already allocated to the native assets, therefore leading to less interest in the publicly traded funds.

When you look at it on a percentage basis, rather than an aggregate analysis, I would go with the former argument when talking about retail investors. But the United States capital markets is still the dominant playing field for institutions around the world and these institutional allocators have much more money than retail.

It is hard to see a world where the Hong Kong ETFs become larger than the US-traded funds.

Another thing to keep in mind is that crypto is still outlawed in mainland China. Unless that legal position is reversed, there are close to 1.4 billion people in Asia who will not be allowed to allocate capital to these funds. Obviously incorporating such a large number of people into the addressable market would be a tailwind for these new ETFs.

Additionally, it is important to keep in mind that there are very real currency issues in some of these Asian countries. Let’s use the Japanese yen as an example. Jesse Colombo highlights that gold is up approximately 165% in the last 5 years when priced in yen.

This is compared to gold only being up about 85% in the same timeframe when priced in US dollars. That is 2x the performance, which is really just a statement on how poorly the yen has performed.

So it is not hard to formulate an argument that Asian investors could seek exposure to bitcoin as relief from their devalued local currencies. The open questions are:

* How much pain are local Asian investors actually experiencing from these currency issues?

* How much capital are they willing to allocate to bitcoin and crypto?

* Will these choose to buy the ETFs or seek out the underlying assets directly?

* Will investors pick US-traded funds over Hong Kong-traded funds?

We won’t know these answers for awhile, but with each incremental positive response there should be a stronger tailwind for bitcoin through this bull market.

It is obvious that the idea of a decentralized currency has become a global phenomenon. People are watching their currencies get debased at an accelerated rate, so they are seeking a long-term store-of-wealth. Bitcoin appears to be one of the solutions that has become an accepted answer.

Now we must wait and see how that popularity translates to capital flows over the next 12-18 months.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Bill Barhydt is the Co-Founder & CEO of Abra, a global platform for digital asset prime services and wealth management, leveraging trusted DeFi expertise to connect the on-chain and off-chain ecosystems for private clients and institutions.

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