Wang Yi, CSOP Quantitative Investment Director, on Bitcoin ETF and the bull market

CSOP has established the first Bitcoin futures in Asia and the first Ethereum futures in the world. This time, Mr. Wang Yi, Investment Director of CSOP’s Quantitative Investment Department, analyzed the current ETF investment situation for us and introduced and shared knowledge about cryptocurrencies and ETFs.

Techub News : As the first Bitcoin futures company in Asia and the first Ethereum futures company in the world, what was the initial preparation process like for Southern China Asset Management?

Wang Yi: Before launching this product, we have been paying attention to investment opportunities and corresponding products in virtual assets. Last October, the Hong Kong government issued a declaration in support of virtual assets and their development. We immediately applied for product registration upon hearing the news.

It is important to emphasize that in the past one to two years, we have conducted preliminary exploration and preparation in terms of investment direction and custody, and realized the importance of the guidelines relatively early. Therefore, after the guidelines were established, we immediately submitted product applications and were fortunate to become the first institution to issue Bitcoin futures ETFs in Asia and the first Ethereum futures ETF in the world.

About Institutional Engagement and Inquiry Methods

Techub News : What is the current status of the ETF market? How many investment institutions are involved? What channels can investors use to make inquiries?

Wang Yi: As for the inflow of investors, there are two main aspects. First, the sales channel is an important factor. At present, many securities firms and banks are unclear about how to participate in ETFs under the new regulations, or there are some regulatory blind spots. For example, for the KYC (know your customer identity) requirements of customers, whether they can meet this requirement, and whether failure to meet this requirement will affect investment. These factors may have an impact on the inflow of investors.

On the other hand, investor inflows are also affected by market sentiment. If the market has a positive attitude towards the newly regulated ETFs and investors are confident in this new way of investing, investors may flow in significantly.

Conversely, if the market is skeptical of the newly regulated ETFs or there is other uncertainty, investors may reduce inflows.

Therefore, from the perspective of investor inflows, sales channels and market sentiment are two key factors. For regulators and relevant financial institutions, these factors need to be carefully studied and addressed to ensure that the newly regulated ETFs can be smoothly launched and recognized and accepted by the market.

Around July this year, HSBC allowed its clients to invest in this ETF, which boosted the market. However, overall, the market is still in the process of continuous exploration.

Different securities firms need to think about a series of issues, such as how to let investors buy, through what channels, and what kind of investors can buy, etc. Each securities firm or bank needs to formulate supporting measures and processes that meet regulatory requirements.

After one to two years of hard work, we have achieved standardization of the process. Despite this, leveraged inverse products have become the most active product category in the Hong Kong market. Therefore, we have similar expectations for virtual assets.

As for the query method, you can query it on various trading software, for example, you can enter the query number 3066 and 3068 in the application for buying and selling Hong Kong stocks to check. From the information released by the Hong Kong Stock Exchange, only the participation of brokerage firms will be disclosed. We can query the number of participating institutions and brokerage firms on the website of the Hong Kong Clearing and Settlement Center . Among them, the top institutions may be HSBC and others.

Techub News : Which one is more popular among investors, Bitcoin or Ethereum?

Wang Yi: Based on the current product status, it is difficult to say which product is more popular among investors. However, from the initial issuance to now, it can be relatively said that Bitcoin is more popular among investors.

Techub News : How many institutions are involved in Ethereum? How many of them overlap with Bitcoin?

Wang Yi: There is not much difference between the two products in essence. Strictly speaking, we understand that the products are still in the early stages and there is no significant differentiation among investors.

Impact of Spot ETFs

Techub News : Assuming that Web3 is in its best stage, such as the approval of the US spot ETF or more positive developments, how many people do you expect to participate in Bitcoin and Ethereum spot futures based on the best expectations?

Wang Yi: We have been closely following the performance and capital inflow of US ETFs. This year, net inflows have indeed increased significantly. Even if there is a possibility of launching spot ETFs, it will not affect current investors' willingness to choose futures ETFs.

Of course, if spot ETFs are really launched, it may have a certain impact on existing futures ETFs, because these two products are essentially different types of the same underlying. Just like gold and gold futures products, both physical and derivative categories may have a certain diversion effect on the same underlying.

Techub News: What investment options do you think cryptocurrency spot and futures ETFs can fill in?

Wang Yi : In today's financial market, investment demand for cryptocurrencies is still a scarce resource. From the perspective of asset allocation, we have noticed that the Hong Kong Stock Exchange offers a wide range of investment products, such as stocks and bonds, which are widely available in the market.

However, both globally and in Hong Kong, cryptocurrency investment options are relatively limited.

Currently, one of the focuses of many investors is the launch of physical ETFs. If such products can be launched in places where the capital market is more active, it will undoubtedly help fill the gap in investors' choice of investment products.

Techub News: The SEC has repeatedly rejected applications for spot ETFs. What do you think about this?

Wang Yi: We have been paying close attention to the SEC's application approvals. It should be pointed out that most of the licensed companies on the exchanges do not obtain CSRC licenses, but ISec licenses, which may involve cross-regulation or a series of issues. These issues deserve our continued attention and in-depth discussion.

Techub News : Do you think that the approval of Bitcoin spot ETF will usher in a new round of bull market?

Wang Yi : Of course, if you say that allowing the issuance of ETFs will attract a lot of investment or capital inflows, the answer is probably yes.

We need to recognize the reality that now may not be a very good time for relatively risky assets, especially for cryptocurrencies. I think cryptocurrencies or virtual assets may be relatively less attractive in a high-interest environment.

I think the issuance of products can be used as a standard or guide to measure changes in the regulatory environment. As to whether a new round of bull market will start, we need to pay attention to the overall macro environment.

While the stock market has performed OK this year, overall we are still in a relatively high interest rate environment, so it's not a very favorable environment for many risk assets.

I don’t think that the issuance of ETFs as a benchmark will start a new bull market. Although allowing the issuance of ETFs may attract a lot of investment or capital inflows, we need to realize that it may not be a good time to invest in risky assets, especially cryptocurrencies. In a high interest rate environment, cryptocurrencies or virtual assets may be relatively less attractive.

Therefore, we need to remain rational and pay close attention to changes in market dynamics and the regulatory environment. At the same time, investors should carefully assess risks and seek professional investment advice to make wise investment decisions.