Substantial withdrawals from Hong Kong crypto ETFs

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15th May 2024 – (Hong Kong) Investors withdrew a significant sum from six Hong Kong-listed spot cryptocurrency exchange-traded funds (ETFs) on Monday, with nearly $40 million being pulled from Bitcoin and ether funds, according to data from Farside Investors. This marked a stark contrast to the relatively stable flow of capital these ETFs experienced since their inception.

The outflows were primarily concentrated in the Bitcoin ETFs managed by ChinaAMC, Harvest Global, Bosera, and Hashkey, which collectively saw $32.7 million exit on Monday. This figure notably exceeds the average outflows, which previously hovered around $6 million. Additionally, the ether-based ETFs recorded outflows of $6.6 million, suggesting a broader hesitancy among investors towards cryptocurrency investments at the moment.

This shift comes in the wake of Bitcoin’s price dip below the $61,000 threshold last Friday, an event that seemingly triggered a cautious response from investors. The reported outflows represent the first instance of collective negative flows across all six ETFs since their launch on 2nd May, indicating a cooling interest or increased risk aversion among participants.

The performance of these Asia-based ETFs starkly contrasts with the initial excitement seen in similar U.S.-listed products. While the Hong Kong ETF market itself is relatively modest with about $50 billion in assets compared to the colossal $9 trillion U.S. ETF market, the withdrawals highlight significant investor sentiment shifts.

Despite earlier speculations that mainland Chinese investors might access these funds via the Stock Connect, enhancing liquidity and broadening the investor base, the Hong Kong Stock Exchange has refuted such claims. This clarification has potentially aligned with the tighter regulatory scrutiny observed in mainland China regarding cryptocurrency transactions, possibly influencing the bearish investor sentiment in Hong Kong.