Hong Kong’s crypto market holds promise for spot ETFs in 2025, despite underperformance since launching six bitcoin and ether ETFs in 2024.
The Managing Director of Hong Kong-based cryptocurrency exchange OSL anticipates a significantly brighter future for spot cryptocurrency exchange-traded funds (ETFs) in 2025.
In April 2024, Hong Kong launched six spot ETFs for bitcoin and ether, following the success of bitcoin ETFs in the United States. Despite being the only region in Asia offering spot crypto ETFs, some observers have found these products underwhelming.
Hong Kong vs. U.S.: Crypto ETF Holdings and Growth Trends
As of December 11, Hong Kong spot bitcoin ETFs held 4,560 BTC, valued at $444.6 million, while its ether funds held 16,280 ETH, equivalent to $59 million. In contrast, U.S. spot crypto ETFs have seen record-breaking volumes and inflows, a trend further boosted after pro-crypto President Donald Trump was reelected.
By early December, U.S. spot bitcoin ETFs had net inflows exceeding $34.06 billion, with spot ether ETFs seeing over $1.78 billion. Speaking at the Foresight 2024 conference in August, Gary Tiu, Executive Director of OSL, noted a systemic market barrier for Hong Kong’s crypto ETFs.
This challenge arises from the extensive network of intermediaries, including brokers and banks, required to handle funds and structured products. Chen Zhao, Director of Digital Assets at Fosun Wealth, agreed, highlighting a shortage of brokers and dealers in Hong Kong willing to manage cryptocurrency ETFs.
Miller, another OSL executive, emphasized that the performance of such products should not be judged by isolated metrics. He added that, proportionally, the performance of crypto ETFs in Hong Kong and the U.S. aligns with their respective equity markets.
Comparing Hong Kong and U.S. Spot Crypto ETF Market Sizes
Hong Kong’s spot crypto ETF market, valued at $351.24 million, represents 0.023% of the Hang Seng Index’s $1.52 trillion market cap. In comparison, the U.S. spot crypto ETF market, worth $5.47 billion, accounts for 0.019% of the combined market cap of the NYSE and Nasdaq.
Looking ahead, Miller foresees “substantial growth” in trading volumes and inflows for Hong Kong’s ETFs, fueled by positive sentiment locally and globally. With a market share exceeding 70%, OSL positions itself as the leading custodian for Hong Kong’s spot crypto ETFs.
Miller also credited favorable developments in the U.S., such as interest rate reductions and a crypto-friendly administration, for bolstering global sentiment and cryptocurrency prices.
As of December 6, Hong Kong’s spot crypto ETFs recorded an all-time high trading volume of over $58 million. While fluctuations have occurred, trading activity has risen since Trump’s reelection.
Additionally, Miller highlighted Hong Kong’s proactive approach to cryptocurrency regulation, which includes tax exemptions for hedge funds and private equity firms on gains from crypto investments. He believes these regulatory efforts, combined with growing investor interest, position Hong Kong’s crypto ETFs to thrive in the evolving global crypto landscape.
