By
Svetlana Soroka
May 18th, 2024
The Hong Kong equities sector is relatively small as opposed to that of the United States.
Crypto market maker Wintermute may have revealed new plans to offer liquidity support to certain spot Bitcoin and Ether exchange-traded funds (ETFs) in the Hong Kong market. The move comes as part of Wintermute’s efforts to expand its footprint in Asia, particularly in the region’s crypto markets.
According to the Wednesday announcement, the market maker is hoping to work closely with two sub-custodians for Hong Kong’s spot crypto ETFs – OSL and HashKey. It hopes to jointly facilitate the buying, selling, and delivery of the underlying Bitcoin and Ether for the spot ETFs that they custody.
In a statement, Wintermute CEO Evgeny Gaevoy acknowledged the huge part that ETFs are poised to play in fostering crypto adoption. However, he also noted that the ETFs may not be able to fully achieve this without the backing of liquidity providers like Wintermute. Part of the statement reads:
“ETFs play a key role in bringing the next wave of investors into the crypto space, both institutional and retail, and without companies like Wintermute providing liquidity, this would not be possible.”
Gaevoy also seized the opportunity to commend the pioneering efforts of Hong Kong in the Asian Pacific (APAC) region, particularly in connection with crypto adoption. He shared that he hopes that other countries in the region will take a cue by following in Hong Kong’s footsteps.
Hong Kong Spot ETFs
Following an earlier approval, six spot Bitcoin and Ether ETFs launched in the East Asian city of Hong Kong on April 30. However, the ETFs, which are managed by China Asset Management, Harvest Global, and Bosera and HashKey, have so far struggled to gain traction.
To put the above statement into perspective, the funds only managed to attract around $22.5 million in inflows in their first week of launch. That is despite the fact that they were seen as significant improvements to their U.S. counterparts.
The improvements bordered on the fact that they are denominated in three fiat currencies and also feature in-kind transfers that allow investors to buy and redeem ETF units directly via Bitcoin or Ether.
Recently, senior Bloomberg ETF analyst Eric Balchunas weighed in on the issue of Hong Kong spot ETFs and how many are comparing wrongly with the numbers that the US spot ETFs are doing. Balchunas wrote in a part statement on X that:
“The HK ETFs at $310m is equal to $50b in the US market. So in that regard, these ETFs are already as big to their local mkt as US ones are to its.”
Wintermute to the Rescue
The Hong Kong equities sector is relatively small as opposed to that of the United States. Its total market cap of $4.5 trillion pales in comparison to the $50 trillion worth of listed equities across all US exchanges.
Also, the Hong Kong equities sector is far more illiquid due to slower economic growth in mainland China since 2022. So, with the support of market makers such as Wintermute, Hong Kong financial markets are about to experience more liquidity.