With Hong Kong likely to approve its spot Bitcoin exchange-traded funds (ETFs) very soon, there have been a lot of discussions concerning its potential. One of those highlighting its potential is Singapore-based crypto service provider Matrixport. According to the platform, the crypto investment product could experience up to $25 billion in demand from Chinese investors through the Southbound Stock Connect program.
Matrixport discusses Hong Kong Bitcoin ETF’s potential
The Southbound Stock Connect program allows traders on the mainland to trade eligible shares listed in the country. In its report, Matrixport noted that the approval of the Bitcoin ETF in Hong Kong could trigger many traders in Hong Kong looking to take advantage of the program. In its estimation, the platform noted that it could recoup more than $70 million in transactions every year. However, Based on its estimate, Matrixport reports that the potential in the market could see it unlock about $25 billion.
Matrixport’s estimate is based on the assumption by Blue Sky that the annual unused Southbound quota in the last three years will be used on the Bitcoin ETFs. According to data from 360MarketIQ, the Southbound Stock Connect program provides mainland Chinese investors with up to HK$540 billion in stocks annually.
However, the last three years have fallen short of the figure with HK$450 billion, HK$400 billion, and $320 billion used in the period.
Anticipation from Funds and mainland investors
Matrixport explained that if the Bitcoin ETF approval goes on as planned without any hitch, there is about HK$250 billion which translates into $25 billion open for the market. Presently, it is unclear if only the mainland investors will benefit from the Bitcoin ETF that will be approved. However, mainland investors have shown their penchant for diversification of their holdings judging by the recent surge in the price of gold.
The Chinese yuan experienced a 2% drop against the United States dollar. This performance extended its losing streak against the dollar. Most analysts are blaming the drop on a recent economic downturn. Matrixport said that traders would be looking for ways to diversify due to the performance of the yuan against the dollar. It noted the Chinese central bank has also been improving up its gold purchases.
There have also been talks about the eagerness of funds in Hong Kong to anticipate the approval of Bitcoin ETFs. ContentFi Labs COO Nick Ruck noted that funds are awaiting approval to issue ETFs. He mentioned that mainland funds have been using their subsidiaries in Hong Kong to apply to list Bitcoin ETFs. If the approval comes as anticipated, it could open up mainland investors to greater access to Bitcoin. The United States approved its Bitcoin ETFs in January and since that period, they have received more than $12 billion in investor funds.
