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How Hong Kong's bitcoin ETF nod could change the crypto landscape

The increased accessibility and legitimacy offered by ETFs could pave the way for wider acceptance of cryptocurrencies as a viable investment class, says experts

How Hong Kongs bitcoin ETF nod could change the crypto landscape

Spot bitcoin and ether exchange-traded funds (ETFs) have officially been approved to start trading in Hong Kong on April 30. It can potentially heighten interest, increase liquidity, and lead to deeper integration of cryptocurrencies into mainstream investment portfolios.

Institutional involvement has historically served as a driving force behind the increased attention and traction observed in various asset classes. The recent approval by the US SEC of 11 bitcoin ETFs resulted in a substantial $1.2 billion of assets being locked within just three months. This influx of funds, coupled with the positive sentiment generated by the ETF, contributed to the notable rally in bitcoin prices.

Talkimg to Bizz Buzz, Sumit Gupta, co-founder, CoinDCX said, “It is indeed heartening to witness developed countries such as the US and Hong Kong taking proactive steps to propel the crypto industry forward. The fact that this development has occurred in Asia for the first time brings it closer to our home, underscoring the global nature of this evolving narrative.”

The trajectory of the crypto industry is moving in a direction that fosters adoption, albeit gradually, signalling promising prospects for its future growth and mainstream acceptance. This trend may have significant implications for India's crypto landscape, he said.

Hong Kong and mainland China are home to a vast number of billionaires, rivalling North America, and their appetite for alternative investments cannot be understated.

Rajagopal Menon, Vice President, WazirX said, “The Chinese real estate market, where a substantial portion of their wealth is traditionally invested, has faced challenges in recent years. This has likely made investors more open to exploring new avenues, and their fondness for gold as a store of value could translate well to the adoption of bitcoin, often referred to as 'digital gold.' Moreover, the Chinese are known for their willingness to embrace emerging technologies and investment opportunities.”

The introduction of bitcoin ETFs in Hong Kong could pave the way for a massive influx of institutional money into this asset class, potentially driving up the demand for and prices of cryptocurrencies worldwide, he said.

The increased buying pressure on bitcoin could ripple across global markets affecting bitcoin investors worldwide, presenting both opportunities and challenges for those invested in or considering exposure to this volatile yet lucrative asset.

Shivam Thakral, CEO of BuyUcoin, India's second-longest-running digital asset exchange said, “The approval of spot bitcoin and ethereum ETFs by the SFC of Hong Kong marks a pivotal moment in bitcoin adoption. This decision is poised to reverberate across international markets, including India. As global investors gain easier access to these digital assets through regulated channels, it could potentially influence India's approach towards cryptocurrency regulation and investment strategies.”

The Hong Kong regulator's approval of bitcoin and ether ETFs marks a significant milestone.

Edul Patel, CEO & Co-founder, Mudrex said, “With ETFs, institutions can gain exposure to digital assets while remaining compliant with regulatory frameworks, mitigating some perceived risks associated with holding cryptocurrencies directly.”

This increased accessibility will likely attract a broader range of institutional investors, including pension funds, hedge funds, and asset managers, who may have been hesitant to enter the market. On the other hand, many retail investors may lack the technical expertise or risk tolerance to invest directly in cryptocurrencies on exchanges, he said.

ETFs provide a more user-friendly option, allowing retail investors to buy and sell digital assets through their existing brokerage accounts, just like traditional stocks or bonds. This accessibility can democratize access to cryptocurrency investments, empowering retail investors to diversify their portfolios and potentially benefit from the growth of the digital asset market. This move underscores the growing acknowledgment of cryptocurrencies as legitimate investment vehicles within established financial frameworks. We will likely see more countries giving the green light to follow suit in the next few months.

Kumud Das

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