0
0
Analysis of Bitcoin ETF Potential in Hong Kong
Analysts are optimistic about the prospects of Bitcoin exchange-traded funds (ETFs) following their introduction in Hong Kong. The use of in-kind creation models in the region is expected to drive significant growth in these financial products. Bloomberg senior ETF analyst Eric Balchunas highlighted the potential benefits of this approach, emphasizing the positive impact on assets under management (AUM) and trading volume.
Insights from Bloomberg Analysts
Balchunas’s views were supported by a research note from fellow Bloomberg ETF analyst Rebecca Sin. Sin pointed out that Hong Kong’s decision to embrace the in-kind creation model for spot Bitcoin ETFs represents a notable opportunity for the market. She highlighted the difference between the US cash-only approach and Hong Kong’s innovative strategy of Bitcoin in, ETF out.
“Hong Kong is aiming for in-kind creation of the ETF, unlike the US, where the transaction is cash only. This could be an opportunity for the market.”
Progress in Hong Kong
Earlier this year, Hong Kong authorities expressed their willingness to accept applications for spot crypto ETFs, with plans for a mid-year launch. Several entities, including Harvest Hong Kong, have already submitted applications to introduce spot Bitcoin ETFs in the region, indicating a growing interest in these products.
In-Kind vs. Cash Creations
The adoption of the in-kind model in Hong Kong diverges from the cash-creation model favored in the US for spot Bitcoin ETFs. In-kind redemptions allow ETF issuers to exchange underlying assets like Bitcoin with market makers, eliminating the need for cash transactions during share creation and redemption. This mechanism streamlines the issuance of creation units without immediate securities sales.
In contrast, the US SEC’s cash redemptions require fund managers to sell Bitcoin to generate cash for redeeming shareholders. BlackRock, a prominent Bitcoin ETF issuer, has raised concerns about maintaining share prices in alignment with Bitcoin’s actual value under this approach.
The move towards in-kind creation in Hong Kong is expected to stimulate growth in Bitcoin ETFs, offering a more efficient and flexible alternative to the traditional cash-based model. As the market evolves, the adoption of innovative strategies like in-kind creations could further enhance the appeal and accessibility of cryptocurrency investment opportunities.
Image/Photo credit: source url
