Hong Kong Crypto ETFs Could Bring $25 Billion Inflows — How Much Could BTC and ETH Rise?
Bitcoin and Ethereum Spot ETF approval in Hong Kong could ignite a major rally.
Key Takeaways
- Hong Kong will launch its first Bitcoin and Ethereum ETFs.
- However, the ETFs’ success is dependent on Chinese investor access.
- There could be as much as $25 billion investment from mainland China.
Hong Kong is set to launch Bitcoin and Ethereum exchange-traded funds (ETFs) by the end of April, potentially significantly affecting the cryptocurrency market. Veteran analyst Markus Thielen from 10x Research said these ETFs have received conditional approval from Hong Kong’s regulators. This follows a trend in the US, where the approval Bitcoin ETF earlier this year year triggered a surge in demand for crypto investments.
$25 Billion Market for Bitcoin and Ethereum ETFs in Hong Kong
Thielen said the success of these ETFs relies on whether investors from mainland China will be allowed to participate. The Shanghai Stock Exchange’s southbound stock connect, allows mainland Chinese investors to buy Hong Kong-listed stocks. More to the point, it also has a substantial annual quota that has not been fully used in recent years.
If these ETFs were included in this program, it could channel up to $25 billion from mainland investors into these funds.
However, Thielen believes that the ETFs won’t be part of the southbound program anytime soon, likely delaying this potential influx of investment. Despite ongoing geopolitical tensions and recent losses in Ethereum-based funds, the new ETFs could present a new opportunity for market growth, assuming they align with Chinese regulatory policies and market dynamics.
How Much ETF Launch in the US Impacted Bitcoin?
Bitcoins Spot ETF debuted in the US in January 2024. The United States Securities and Exchange Commission (SEC) approved 11 Bitcoin ETF applications, including BlackRock, Fidelity, Ark Invest, WisdomTree, and Grayscale, with an average of $125 million net inflows per day.
The cumulative spot Bitcoin ETF volume started at $4.5 billion and rose to $28.2 billion by the end of January. Today, this number exceeded $217 billion.
Although we saw an outflow from GBTC’s fund in Bitcoin, overall, the number of Bitcoins held by these 11 funds grew throughout the months. In January, despite the GBTC outflow, we saw a rise from 621k BTC to 648k BTC.
This metric peaked at 841,000 on April 8 and is still close to those levels currently at 836,000.
BTC first made a downturn in price on January 11, after the ETF in the US was launched. It fell from a high of around $46,700 to a low of $38,800 on January 23. However, after picking up the pace, its value grew by nearly 90%. It reached its all-time high of $73,600 on March 13.
Finally, in January, these 11 funds combined in their BTC ETF assets under management started at $29,47 billion. As it initially fell to $25.17 billion on January 23, so did the price of Bitcoin, indicating a strong correlation. After that, the number grew, peaking at $60 billion on March 13 when Bitcoin reached its all-time high.
This means that around a $35 billion increase in AUM correlated with a Bitcoin price increase of 90% or 2.57% per $1 billion in AUM.
What Can Happen Now?
Following the calculations and the US example, we can start to envision what would happen with a potential $25 billion inflow from Hong Kong. Although we have done the calculations only for Bitcoin and are talking about Ethereum, it is safe to say that Hong Kong will be introducing Bitcoin ETF first.
The US is still delaying its Ethereum Spot ETF approval, and Hong Kong has only provided conditional approval. Two main variables are still unknown – when are the ETFs coming, and how much capital will be allocated to them?
Assuming Thielen’s best-case scenario of $25 billion, that would come as a cumulative 64.2% increase in asset prices.
Bitcoin’s price is currently in a descending triangle, which could be its temporary corrective stage. By months-end, we expect a slightly lower price than it is currently, potentially reaching a low of $60,000.
If Bitcoin Spot ETF is first introduced in Hong Kong and all of these funds flow into Bitcoin, an increase of 64% would mean BTC could reach $97,740. However, if both ETFs launch simultaneously and funds are evenly distributed, an increase of 32% would lead BTC to a new all-time high of $78,700.
On the other hand, Ethereum’s price, which fell by 27% from its March peak, is facing an 8% downside potential. On the other hand, we expect Bitcoin to move slightly lower. Measured from our target of $2,800 at its decline’s end, an increase of 32% would mean ETH climbs to $3,700. This is, however, still a lower high than its record price.
Conclusion
In this analysis, we have triend to cover the implications of China’s exposure to Bitcoin and Ethereum through Hong Kong and where it can lead the asset prices. Many moving targets and unknown data remain, but an underlying conclusion remains highly bullish.
While we have covered the institutional investors’ side, the overall market sentiment leading these ETF launches is expected to cause a new euphoria with retail investors and traders, further exaggerating the price rises.
This could be a significant catalyst for the next major runup in BTC and ETH after Bitcoin’s halving. In turn, it could start the next rally.
Disclaimers
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
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