On April 15, Hong Kong took a significant step towards becoming a crypto hub after approving the first spot Bitcoin and Ethereum exchange-traded funds (ETFs). However, an ETF analyst, Eric Balchunas, is pouring cold water on the excitement palpable across the crypto scene. 

Taking to X, Balchunas is warning investors to be especially cautious about expecting a major influx of capital, especially into the spot Bitcoin ETF, as was first witnessed in the United States early this year. 

In the analyst’s preview, spot ETFs in Hong Kong, while welcomed, might not be a game-changer some anticipate. Among the leading reasons these products will not significantly impact the market is the relatively small size of the Hong Kong ETF market, estimated to be around $50 billion. Though Chinese mainland investors have more capital, they are officially restricted from participating.

Additionally, Balchunas has identified possible liquidity concerns and the inefficiency of the city-state’s rails. Accordingly, the underlying infrastructural hitch might see these products launch with wider bid-ask spreads, unlike those in the United States. 

Based on this, and considering the relatively high liquidity and involvement of Wall Street heavyweights like BlackRock and Fidelity, spot ETF issuers in the United States will have an edge.

So far, multiple applicants, including China Asset Management and Harvest Global Investments, have received approval from the Hong Kong Securities and Futures Commission (SFC) to launch spot Bitcoin and Ethereum ETFs. These products will likely begin trading in roughly a week.

Before then, BTC prices remained under pressure, as seen in the daily price action chart. The coin is down roughly 12% from all-time highs. Even so, buyers are in control and dominate from the top-down preview.

According to Coinlore, BTC is up approximately 120% year-to-date, and analysts expect more gains in the weeks after the Halving.

The approval, which came earlier than expected, is when the city-state is actively positioning itself as a leader in crypto, contrasting with mainland China’s stricter stance. In the mainland, crypto trading, staking, and mining remain banned. However, the government supports emerging technologies, including blockchain and artificial intelligence (AI). 

In the past, President Xi Jinping said blockchain was a “critical breakthrough” and advocated for its development. Pilot programs on applications in digital evidence storage and smart courts have been launched. At the same time, China is backing the development of the Blockchain Service Network (BSN) to promote secure and controlled adoption. 

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