The approval of the Hong Kong spot Bitcoin ETF draws praise and caution from industry players

The approval of spot Bitcoin (BTC) exchange-traded funds (ETFs) in Hong Kong earlier this week represents a significant industry milestone for some experts. However, they warn that other larger market forces, such as persistent inflation and geopolitical risk, could overshadow the bullish phenomenon.

“We are delighted to witness the historic launch of Asia's first bitcoin exchange ETF,” said Livio Wang, chief operating officer of Hong Kong-based Hashkey Group, in a statement. This will serve as a milestone for traditional financial institutions in Hong Kong to enter the market and provide retail users with a more convenient shopping gateway.

At the same time, Wang said, unlike the US spot bitcoin ETFs approved in January, the Hong Kong spot bitcoin ETFs have several unique features, such as subscription and redemption in fiat currency and in bitcoin and statscoins themselves. Wang also talked about Hong Kong regulators approving the Spot Ether (ETH) ETF, which faces more regulatory hurdles in the United States.

Similarly, Patrick Pan, CEO and Chairman of OSL Exchange, told Cointelegraph that “the launch of these EFAs is expected to significantly increase capital flows into the digital asset market in Hong Kong.” Pan also praised the Hong Kong spot ETF's ability to allow in-kind settlement, explaining that such a structure would result in “uninterrupted trade flows” and “enhanced market liquidity”.

Crypto exchange eToro is also big on the prospect of Hong Kong spot ETFs. “Hong Kong will become the first Asian jurisdiction to have a bitcoin spot ETF, positioning itself as Asia's rising crypto hub, and paving the way for other neighboring countries and territories to follow suit with their own ETFs,” the statement continued:

“More potential investors and integration into the traditional financial system could be good for the value of bitcoin.”

But for eToro, after the Hong Kong ETF news, all eyes will now rest on the Bitcoin Halving event. “Now the question on every Bitcoin investor's mind is if we will see the price rally again to a new all-time high immediately after the supply shock subsides, or if the price could go even lower, half selling. A news event after the build-up, confirmation from the Bitcoin spot ETF earlier this year. Is it the same as?” The exchange was announced.

Others are less enthusiastic about the prospects for the Hong Kong Spot Bitcoin ETF.

“Mainland Chinese investors probably won't be eligible to buy Hong Kong-listed bitcoin and ether ETFs as they are banned from buying virtual assets,” Bloomberg ETF analyst Eric Balchunas opined. Because of such pent-up interest, Balchunas predicts that Hong Kong spot Bitcoin ETFs will attract only “$1 billion” of the roughly $50 billion currently managed by U.S. spot Bitcoin ETFs.

Meanwhile, Markus Thielen, founder of Singaporean blockchain analytics firm 10x Research, said the company “sold everything last night,” a day after the Hong Kong spot ETF was approved. “Our growing concern is that risk assets (equities and crypto) are on the brink of a major price correction,” Thielen added.

The main trigger is unpredictable and persistent inflation. With the bond market now at less than three discount points and the 10-year Treasury yield above 4.50%, we may have reached a tipping point for risk assets.

Bitcoin has lost nearly 20% since hitting an all-time high of $73,750 last month. On April 13, the digital asset took a nose dive due to the escalating tensions in the Middle East.

Related: ‘China to start auction' — Will Hong Kong's Bitcoin ETFs fuel the halving rally?