Tag: bitcoin etf

Hong Kong Said to Be Close to Approving Its First Spot Bitcoin ETFs

Spot bitcoin exchange-traded funds could be launched in Hong Kong this month with the first approvals likely to be announced next week, two people familiar with the matter said.

That timeline would make Hong Kong Asia’s first city to offer the popular ETFs and is much faster than industry expectations of launches sometime this year.

Regulators have sped up the approval process, according to one of the people.

Having lost much of its shine as a global financial hub due to restrictions during the pandemic, China’s faltering economy and Sino-US tensions, Hong Kong authorities have been keen to do what they can to improve the city’s attractiveness for financial trading.

“The significance of Hong Kong ETFs is far-reaching as it could bring in fresh global investment as well as pushing crypto adoption to a new height,” said Adrian Wang, CEO of Metalpha, a Hong Kong-based crypto wealth manager.

The US launched the first US-listed exchange-traded funds (ETFs) to track spot bitcoin in January, drawing roughly $12 billion (roughly Rs. 99,987 crore) in net inflows, data from BitMEX Research shows.

Bitcoin has gained more than 60 percent this year and hit an all-time high of $73,803 (roughly Rs. 61.5 lakh) in March. It was trading at around $69,000 (roughly Rs. 57.5 lakh) on Wednesday.

At least four mainland Chinese and Hong Kong asset managers have submitted applications to launch the ETFs, the two sources said.

The Hong Kong units of China Asset Management, Harvest Fund Management and Bosera Asset Management are among the applicants, according to the two people and a third source.

The sources were not authorised to speak to media and declined to be identified.

Hong Kong’s Securities and Futures Commission (SFC) and the three Chinese companies declined to comment.

China Asset Management and Harvest Fund Management’s Hong Kong units obtained approval this month to manage portfolios that invest more than 10 percent in virtual assets, according to the SFC’s website.

Their parent companies are among the biggest mutual fund firms in China, with each managing over CNY 1 trillion ($138 billion or roughly Rs. 11,49,963 crore) in assets.

Although cryptocurrency trading is banned in mainland China, offshore Chinese financial institutions have been keen to participate in crypto asset development in Hong Kong.

Hong Kong approved its first ETFs for cryptocurrency futures in late 2022. The largest one – the CSOP Bitcoin Futures ETF – has seen its assets under management swell seven times since September to around $120 million (roughly Rs. 999 crore).

Hong Kong-based Value Partners has also said it is exploring launching a spot bitcoin ETF. It has not disclosed if it has submitted an application.

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US SEC to Approve Ethereum ETF in May, Standard Chartered Predicts

The US Securities and Exchange Commission is likely to allow exchange-traded funds to hold the cryptocurrency Ethereum in May, Standard Chartered predicts.

May 23 is the last date by which the agency must consider ETF applications from VanEck and Ark 21Shares, the bank said in a research report Tuesday. The asset managers will be the first to come up against the final deadline.

Standard Chartered expects the SEC to rule on the applications on the final date, as it did on January 10, when it approved 10 Bitcoin ETFs. Ethereum has key similarities to Bitcoin’s legal and financial status that suggests it will follow a similar approval pattern, according to Geoff Kendrick, the head of FX Research, West, and Digital Assets Research at Standard Chartered.

Last June, the SEC left Bitcoin and Ether off a list of 67 tokens it considered to be securities. In addition, Ether — like Bitcoin — also has futures traded on the Chicago Mercantile Exchange — a key surveillance tool. At about $285 billion (roughly Rs. 23,66,701 crore), Ether is the second-largest cryptocurrency in market value after Bitcoin.

Kendrick expects Ether’s price to rise to $4,000 (roughly Rs. 3,32,168) by the projected May 23 approval date, assuming that it follows a trading pattern similar to Bitcoin through the ETF approval process. Ether traded at about $2,370 (roughly Rs. 1,96,809) on Tuesday.

That price prediction, however, is based on multiple assumptions being true, including general market sentiment for approval remaining low, implied-volatility being wrong, and the SEC approving multiple applications on the same day.

Ether is expected to avoid much of the selloffs that Bitcoin experienced post-ETF approval, Standard Chartered said. Bitcoin fell as much as 20 percent following the ETF approval as investors, including FTX, sold billions in holdings of the Grayscale Bitcoin Trust (GBTC). The fund was converted from a trust that holders couldn’t make redemptions. Grayscale’s existing Ethereum trust holds a smaller portion of the total market capitalization of Ether, compared with the Bitcoin held in GBTC.

“These factors should make ETH less vulnerable than BTC to a post-approval selloff,” Kendrick wrote.

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US Bitcoin ETFs See $4.6 Billion in Volume in First Day of Trading, Grayscale and BlackRock Dominate

US-listed bitcoin exchange-traded funds (ETFs) saw $4.6 billion worth of shares trade hands as of Thursday afternoon, according to LSEG data, as investors jumped into the landmark products approved by the US securities regulator on Wednesday.

The products mark a watershed moment for the cryptocurrency industry that will test whether digital assets – still viewed by many professionals as risky – can gain broader acceptance as an investment.

Eleven spot bitcoin ETFs – including BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF, among others – began trading Thursday morning, kicking off a fierce competition for market share.

Grayscale, BlackRock and Fidelity dominated trading volumes, the LSEG data showed.

“Trading volumes have been relatively strong for new ETF products,” said Todd Rosenbluth, strategist at VettaFi. “But this is a longer race than just a single day’s trading.

The green light from the US Securities and Exchange Commission for the products finally came late on Wednesday, following a decade-long tussle with the crypto industry.

Some executives called out bitcoin as a high-risk investment, and Vanguard – the largest provider of mutual funds – said it had no plans to make the new batch of spot bitcoin ETFs available on its platform to its brokerage clients.

The SEC had earlier rejected all spot bitcoin ETFs on investor protection concerns. SEC Chair Gary Gensler said in a statement on Wednesday that the approvals were not an endorsement of bitcoin, calling it a “speculative, volatile asset.”

The ETF launches lifted the price of bitcoin up to its highest level since December 2021. It was last up 0.77 percent at $46,303 (roughly Rs. 38,39,315), while the price of ether, the second-largest cryptocurrency, was up 2.79 percent at $2597.95 (roughly Rs. 2,15,414).

Race for market share

The regulatory nod sparked intense competition for market share among the issuers, some of whom slashed the fees for their products well below the US ETF industry’s standard even before Thursday’s launch.

Fees on the new bitcoin ETFs range from 0.2 percent to 1.5 percent, with many firms also offering to waive fees entirely for a certain period or for a certain dollar volume of assets. After its ETF started trading, Valkyrie cut its fees a second time to 0.25 percent and waived them for the first three months.

Grayscale was approved to convert its existing bitcoin trust into an ETF on Thursday, overnight creating the world’s largest bitcoin ETF with more than $28 billion (roughly Rs. 2,32,178 crore) in assets under management.

Estimates for how much spot bitcoin ETFs could reel in vary widely. Analysts at Bernstein estimated that flows will build up gradually to cross $10 billion (roughly Rs. 82,920 crore) in 2024, while Standard Chartered analysts this week said the ETFs could draw $50 billion (roughly Rs. 4,14,604 crore) to $100 billion (roughly Rs. 8,29,209 crore) this year alone. Other analysts have said inflows could be $55 billion (roughly Rs. 4,56,063 crore) over five years.

As the ETFs began trading on Thursday, market participants were closely watching bid-ask spreads: the difference between the price for a trader to buy into an ETF and the price it can be sold. ETFs with narrower spreads are typically viewed as more desirable.

Trading volume, internal plumbing and the number of participants involved “are critically important to driving the spreads to a good spot,” said Jason Stoneberg, director of product strategy at Invesco, whose ETF with Galaxy Digital debuted on Thursday.

Some analysts cautioned that the euphoria around the approval might be premature. The broader investment community still views cryptocurrencies as risky, with scandals such as the implosion of crypto exchange FTX in 2022 adding to investors’ wariness.

A Vanguard spokeswoman said the firm had no plans to launch its own crypto investment products, and that its focus remains on core asset classes such as stocks, bonds and cash, which it views “as the blocks of a well-balanced, long-term investment portfolio.”

Speaking at a webinar on Thursday, Sharmin Mossavar-Rahmani, head of the Investment Strategy Group and chief investment officer of Wealth Management at Goldman Sachs, said cryptocurrencies had no place in an investment portfolio.

“When you think about it, where is there any value to something like bitcoin?,” she said. “We don’t think it is an asset class to invest in.”

Crypto stocks gain

Still, some expect the products to pave the way for even more innovative crypto ETFs, including spot ether products.

Grayscale CEO Michael Sonnenshein said in an interview Thursday that the firm plans to file for a covered call ETF in an effort to allow investors to generate income from options on its spot bitcoin product.

Cryptocurrency-related stocks initially climbed higher on Thursday, but ended the day lower, with bitcoin miners Riot Platforms and Marathon Digital dropping 15.8 percent and 12.6 percent respectively.

Bitcoin investor Microstrategy fell 5.2 percent and crypto exchange Coinbase 6.7 percent. The ProShares Bitcoin Strategy ETF, which tracks bitcoin futures, gained 0.44 percent.

Also on Thursday, Circle Internet Financial, the company behind stablecoin USDC, said it had confidentially filed for a US initial public offering. Circle controls the issuance and governance of USDC, a cryptocurrency pegged to the US dollar.

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Cryptocurrencies Pose Risks to Emerging Markets, Central Bank’s Stand Remains Unchanged: RBI Governor

Cryptocurrencies can pose significant risks to emerging markets, the Reserve Bank of India (RBI) chief said on Thursday, cautioning that the central bank’s stand on the issue remains unchanged despite wider acceptance in other countries.

“Our position, my position and the RBI’s position on this (cryptocurrencies) remains unchanged irrespective of who does what,” Shaktikanta Das said in response to a question about the US securities regulator approving the first US-listed exchange traded funds to track Bitcoin, a move that could bolster the world’s largest cryptocurrency and the broader crypto industry.

“For emerging market economies and for advanced economies also, travelling down that path will create huge risks which will be very difficult to contain going forward,” Das added.

Cryptocurrencies have no underlying value and pose risks for macroeconomic and financial stability, the central bank chief has repeatedly said.

RBI Governor Das highlighted the benefits of the central bank digital currencies, or e-rupee in India’s case, and said the central bank is working on “programmability” of the e-rupee to enable cash transfers, such as targeted transfers to farmers.

The central bank also plans to start pilots for using the e-rupee in new segments in the wholesale space, he added.

In December, Indian banks disbursed some employee benefits through the digital rupee, helping the RBI meet its target of one million daily transactions by end-2023, three sources directly familiar with the development said last week.

The RBI and the National Payments Council of India are in talks with several countries for adoption of India’s payments system Unified Payments Interface for cross-board transactions, the governor said Thursday.

Das also said the central bank is closely looking at model-based artificial intelligence lending by financial entities.

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