BTC spot ETF begins to show its magic, pension funds also want to enter the market

The US BTC spot ETF is pending, and Hong Kong can’t wait. On December 22, the Hong Kong Securities and Futures Commission issued four circulars in a row, the most important of which was the announcement that it would approve a virtual asset spot ETF.

OldMoney's irresistible aphrodisiac

The US BTC spot ETF is pending, and Hong Kong can’t wait. On December 22, the Hong Kong Securities and Futures Commission issued four circulars in a row, the most important of which was the announcement that it would approve a virtual asset spot ETF.

BTC spot ETF is the most coveted "aphrodisiac" in the crypto world. Every discussion in history has led to a series of market climaxes. Now, Hong Kong is about to open this bottle of strong medicine, and the best performing financial asset in the world for nearly a decade is placed in the ETF, which inevitably arouses the desire of the old money that has been eager to move.

Many traditional funds have long coveted Bitcoin, but due to the high risks and the lack of compliant entry channels, they can only watch Bitcoin soar, which is really not a pleasant feeling. Therefore, some institutions have to give their money to Grayscale to buy BTC even if they can only enter but not exit. What's more, some have set their sights on Microstrategy, a listed company that has invested heavily in BTC, and have been buying its stocks crazily to get a taste of BTC indirectly.

Although the Chicago Mercantile Exchange has long listed a Bitcoin futures ETF, and Hong Kong also has a futures ETF launched by Southern East Investment, it can't quench the thirst of the old financial groups at all. After all, most public funds cannot speculate in futures, and high-risk assets such as BTC cannot be added to the investment list. But spot ETFs are different. Whether it is a public or private fund, spot ETFs are regular investment targets. No matter whether they are filled with BTC or gold, they can all be invested.

Hundreds of billions of dollars in incremental funds doubled the growth rate

With the liberalization of Bitcoin spot ETFs in Hong Kong and the United States, BTC ETFs will directly enter the traditional securities market. Funds, family offices, and listed companies do not need to modify their investment scopes and can configure BTC in their familiar securities software. At a time when high-quality assets are scarce in the market, Bitcoin, as the hottest and most popular new asset, is able to become the top investment target with the help of ETFs.

The US 401(k) pension fund is already eager to try. Steven T. Larsen, founder of Columbia Consulting in Spokane, Washington, said that once the US SEC nods to the Bitcoin spot ETF, more companies will decide to offer Bitcoin ETFs in their 401(k) product lineup.

Once huge funds such as pension funds enter the market, the crypto market will usher in a huge increase. Looking at the US market alone, the total asset management scale of the 14 institutions that have applied for spot Bitcoin ETFs is currently 14 trillion US dollars. Even if 1% of these funds enter the market, it can bring in hundreds of billions of dollars in new funds. The scale of 401(k) pension funds exceeds 7 trillion US dollars, and it is also expected to bring in tens of billions of dollars in funds.

Looking at the Hong Kong market, the market size of the Hong Kong Stock Exchange is nearly 5 trillion US dollars, and the AUM of many large asset management institutions in Hong Kong has reached hundreds of billions of US dollars. Against the backdrop of the Hong Kong Securities and Futures Commission's efforts to develop Web3, investing in BTC spot ETFs will become an important option for asset management institutions, and funds of tens of billions of US dollars may continue to flow into BTC ETFs.

It is expected that in a few years, hundreds of billions of dollars of funds from around the world will be injected into BTC spot ETFs. The current market value of BTC is more than 800 billion US dollars, and more than half of it is held by long-term holders. The market circulation is limited, and with hundreds of billions of dollars of funds entering the market, BTC is expected to double rapidly again.

Who can get on the "table?"

The huge potential scale of virtual asset spot ETFs will undoubtedly provide huge opportunities for ETF issuers. In the United States, asset management institutions such as BlackRock and Grayscale have already taken action, but which institutions in Hong Kong can seize this wave of financial dividends?

Among Hong Kong funds, Harvest Fund and China Asset Management are strong. The former has issued Harvest CSI 500 ETF and the latter has issued China Asset Management SSE 50 ETF. These two old Chinese funds have sufficient strength to issue BTC spot ETFs. However, the Chinese background has formed a certain degree of shackles. Due to the strict supervision of virtual assets such as BTC in mainland China, the approval process for Chinese funds to issue BTC ETFs has been blocked.

There are currently more than a thousand Type 9 asset management institutions in Hong Kong, but traditional Type 9 institutions can only manage investment portfolios with a virtual asset ratio of less than 10%. Only after upgrading to virtual assets can they manage investment portfolios with a virtual asset ratio of 10%-100%. Currently, there are only a dozen institutions that have upgraded to Type 9, including the old local brokerage Victory Securities, Pando Finance , and EBO Capital Asia.

Among them, Victory Securities has an active layout in the field of virtual assets. Not long ago, it became the first brokerage firm in Hong Kong to provide virtual asset trading to retail investors. It also jointly issued the first compliant BTC fund that accepts stablecoin subscriptions with EMC Labs. It is believed that it will not miss this opportunity to "get on the table".

In addition, Southern China Asset Management, which previously issued BTC futures ETFs, and licensed virtual asset exchange HashKey are also expected to get a share of the BTC spot ETF. In this wave of cryptocurrencies in Hong Kong, exchange giants such as Binance have been silent and basically have no chance to participate.

It is expected that Hong Kong’s first BTC spot ETF will be launched soon, and then we will know the magic of this "aphrodisiac".