Earlier this week, a China-listed gold ETF’s premium surged to 30% due to high demand.
According to a Reuters report on Wednesday, regulators in Hong Kong are set to approve Hong Kong’s New Spot Bitcoin ETFs as early as next week. This could potentially offer an option for Chinese investors who are hesitant to invest in domestic real estate and stocks. However, a K33 analyst warned that the market should not anticipate flows comparable to those of U.S. spot ETFs.
Heightened anticipation for spot-based bitcoin ETFs in the U.S. and the eventual inflows supercharged bitcoin’s run-up to new all-time highs, and now Hong Kong regulators reportedly are inching closer to approving similar funds, news that thus far has been mostly unnoticed in crypto circles.
These vehicles, however, could open the floodgates for Chinese investors looking for a new haven next to gold and overseas real estate and stocks in which to store their wealth.
According to Noelle Acheson, a macro analyst and author of the Crypto Is Macro Now newsletter, the recent developments in the region will have a significant impact. Acheson mentioned in an email interview that the significance of the region is not limited to providing access to hedge funds and family offices, but it also offers access to investors in mainland China.
Chinese investors are hesitant to invest in domestic real estate and stocks due to the well-known issues in the Chinese housing market, the construction sector, and equities. This has led to a growing interest in alternative assets such as gold, as Acheson explained. Recently, trading with a gold-linked ETF in China was suspended because the premium on its price reached 30%, and investors were showing a great interest in the asset trading at record-high prices.
There may be a significant influx of funds into Bitcoin, as Acheson suggests, as seen in the past. Additionally, if concerns regarding the yuan’s further depreciation increase, the investment case for the largest cryptocurrency could become even more significant. Acheson also pointed out that the Chinese authorities might be aware that a significant number of their citizens might diversify into hard assets, whether it is approved or not. They would most likely prefer these assets to be unrelated to the United States economy.
According to Markus Thielen, the founder of 10x Research, a Singapore-based analytics firm, the recent Exchange-Traded Funds (ETFs) could potentially lead to a retail buying frenzy in China, similar to the one seen during the 2013 bull market. Bitcoin’s popularity soared in that year, pushing its price from $10 in January to over $1,000. However, the bull market came to an end when the Chinese government prohibited financial institutions from trading the asset in December.
Thielen suggested that there aren’t many options for Chinese citizens looking to invest, as 70% of them own property, and the stock market has recently seen lower prices. According to Thielen, Bitcoin could be a potential alternative.
According to a senior analyst at K33 Research, the approval of Hong Kong’s New Spot Bitcoin ETFs could be a positive catalyst for Bitcoin, but the market should not expect flows as significant as those seen by the U.S. spot funds. The two futures-based bitcoin ETFs listed in Hong Kong have had “solid” growth this year, doubling their assets in BTC terms, but their combined size is less than 2,000 BTC, which is just 2% of the U.S.-listed futures ETFs.
According to Lunde, the difference in size between HK futures ETFs and those in the US suggests that HK ETFs are likely to experience more moderate flows.
