US and Hong Kong have launched their own spot crypto exchange-traded funds. Other markets are also expected to follow suit. The race to bring digital assets into the mainstream is heating up.
In January, the US Securities and Exchange Commission (SEC) authorized the first batch of spot Bitcoin exchange-traded funds (ETF). Hong Kong mirrored the move in late April and upped the ante with additional approval of spot Ether ETFs.
Which market saw a better start? Which one is taking the lead? More importantly, which one could end up winning it all?
Trading Volume
Based on trading volumes, US outdid Hong Kong by far. In the first day alone, the former market recorded $4.6 billion in trading volumes across 11 spot Bitcoin ETFs. In contrast, Hong Kong’s six Bitcoin and Ether ETFs saw just $12 million in total trading volume during their debut.
Since then, the gap in trading volumes and assets has persisted with no sign of narrowing any time soon.
Ether Advantage
Although the US has the upper hand in volumes, Hong Kong has the edge in product diversity. While the latter market introduced both Bitcoin and Ether ETFs on the same day, the US remains undecided. According to a «Reuters» report citing unnamed industry insiders, the SEC is expected to deny applications for Ether ETFs this month, though onlookers believe there will be a reversal later.
«The template is likely to be similar to bitcoin: with futures-based ethereum ETFs already approved, the SEC (if it denies the approval of spot ethereum ETFs) is likely to face a legal challenge and eventually lose,» said a note by J.P. Morgan analysts led by Nikolaos Panigirtzoglou.
Technical Benefits
Some also highlight that Hong Kong-listed crypto ETFs have other product-related advantages over competing jurisdictions such as additional options in redemption methods.
«The in-kind redemption and subscription could be attractive for investors that appreciate such optionality, for example, existing institutional BTC and ETH owners that custody their own virtual assets may consider the benefit of holding through the ETFs without the cost of first converting to fiat,» said Robert Zhan, director of risk consulting at KPMG China.
More Contenders
This is not expected to be a two-horse race. According to a «Bloomberg» report citing unnamed sources, Australia is also expected to approve its own spot Bitcoin ETFs before the end of 2024. New York-based VanEck as well as local firms BetaShares and DigitalX have all submitted applications to list such products earlier this year.
«So with the spot ETF, the market is becoming more normalized, which I think is necessary at this juncture of growth. You'll then start to see a build out of the options market, the futures market,» said Standard Chartered’s crypto research head Geoff Kendrick in February. «And you then start to see some of the bigger institutional money, perhaps reserve managers, et cetera, also start to get involved with their counterparts like banks like ours.»
