With the imminent approval of spot Bitcoin exchange-traded funds (ETFs) in Hong Kong, discussions have intensified regarding the potential impact, with Singapore-based crypto service provider Matrixport highlighting significant opportunities. Matrixport predicts that Chinese investors could generate up to $25 billion in demand through the Southbound Stock Connect program.
Matrixport anticipates substantial demand for the Bitcoin ETFs among traders in Hong Kong, leveraging the Southbound Stock Connect program, which allows mainland traders to access eligible shares listed in Hong Kong. The platform estimates annual transactions exceeding $70 million and suggests the market could unlock approximately $25 billion.
Matrixport's estimate is based on Blue Sky's assumption that the annual unused Southbound quota in the last three years will be utilized for Bitcoin ETFs. Despite the program's potential to provide mainland Chinese investors with up to HK$540 billion in stocks annually, recent years have seen lower figures, prompting anticipation for Bitcoin ETF approval.
HK Stock Connect Southbound Cummulative Annual Fund Flow. Source: 360MarketIQ
The approval of Bitcoin ETFs could address mainland investors' desire for portfolio diversification, particularly amid the recent depreciation of the Chinese yuan against the US dollar. The Chinese central bank's increased gold purchases further signal investor interest in alternative assets.
Funds in Hong Kong eagerly await approval to issue ETFs, with mainland funds leveraging subsidiaries in Hong Kong for ETF listing applications. Anticipated approval could enhance mainland investors' access to Bitcoin, mirroring the surge witnessed in the United States following Bitcoin ETF approval in January, which attracted over $12 billion in investor funds.
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