Hong Kongs in-kind ETF creation could be a significant market opportunity: Analysts

Hong Kong aims to enable in-kind creations and redemptions for spot Bitcoin ETFs in the second quarter.

Hong Kongs financial regulators aim to offer in-kind creation models for spot Bitcoin exchange-traded funds (ETFs).

This could be a significant market opportunity, which could considerably increase assets under management (AUM) and trading volume for Bitcoin ETF issuers in the region, according to a research note by Bloomberg ETF analyst Rebecca Sin, shared in a March 26 X post by Eric Balchunas:

“Hong Kong is aiming for in-kind creation of the ETF, unlike the U.S., where the transaction is cash only – in the U.S. its cash in, Bitcoin ETF out, while Hong Kong aims for Bitcoin in, ETF out. This could be an opportunity for the market.”

Hong Kong ETFs chart. Source: Eric Balchunas

Hong Kongs approach is in contrast with the model of the U.S. Securities and Exchange Commission (SEC), which exclusively allows for cash creation models for spot Bitcoin ETFs.

Related: TradFi Wall Street firms pushing for Ether ETF approval, says former Binance Labs head

Bitcoin ETFs amassed a total of $11.28 billion worth of flows since launch, with a net negative of 1.07 billion in net flows last week, before starting to pick up on Monday.

After five consecutive days of negative outflows last week, the United States spot Bitcoin ETFs saw over $15 million worth of flows on March 25, the same day Bitcoin price (BTC) recorded its highest daily close of above $69,000 in the past 10 days.

Bolstered by the ETF inflows, Bitcoin price reclaimed $70,000 on March 25. As investors have resumed accumulating BTC off exchanges, BTC supply on Coinbase reached a nine-year low of 344,856 BTC on March 18.

Last week‘s negative spot Bitcoin ETF inflows aren’t a long-term concern for Bitcoin holders and price actio, Bitfinex analysts told Cointelegraph:

“Even though negative ETF outflows featured heavily last week, all of it is from the Grayscale Bitcoin Trust (GBTC), as investors both switch out of the higher fees demanded by GBTC and also take profit, especially as many of these investors are long-term holders who entered during the bear market. GBTC investors are not the only sellers in the market. Whale wallet activities have also indicated significant profit taking.”