Hong Kong will play host to a new type of Bitcoin exchange-traded fund allowing investors to bet against the original cryptocurrency even as it rallies on US President Joe Biden’s decision to abandon his re-election bid.
CSOP Asset Management Ltd. will launch the Asia-Pacific region’s first crypto-linked inverse ETF — the CSOP Bitcoin Futures Daily (-1x) Inverse Product — in Hong Kong on Tuesday morning, according to the firm’s chief executive officer Ding Chen.
Investors in the largest cryptocurrency have had a bumpy ride over the summer. Bitcoin sank to below US$54,000 ($72,603) in early July before optimism around pro-crypto Donald Trump’s chances of reassuming office fueled a recovery. The token was trading at US$67,234 as of 3.12pm in Hong Kong on Monday.
For Hong Kong, the inverse ETF is the latest move in a years-long campaign to establish the city as a crypto-friendly hub to rival the likes of Singapore and Dubai. Asset managers including Harvest Global Investments B73 Ltd., the local unit of China Asset Management, and a partnership between HashKey Capital Ltd. and Bosera Asset Management (International) Co. listed Bitcoin and Ether ETFs in Hong Kong on April 30 — but the products have so far had a lukewarm reception.
Collecting between US$50 million and US$100 million in assets for the inverse Bitcoin ETF over a couple years is “definitely achievable”, CSOP’s Chen said in an interview with Bloomberg Intelligence’s Rebecca Sin and David Ingles. The firm will charge a management fee of 1.99%.
Some traders think Trump-fueled optimism could send Bitcoin to US$100,000 “very soon”, Chen said. Investors will need to “either control the risk or take another position,” but that can be challenging with the products that are available at present, she added. CSOP is also working to launch an inverse Ether ETF, according to Chen.
See also: Bitcoin retreats from US$100,000 in worst spell since Trump’s win
Globally, inverse crypto exchange-traded products have drawn in about US$106 million to date, according to data compiled by Bloomberg. The largest of these funds is the Short Bitcoin Strategy ETF from ProShares Advisors LLC, which has collected US$62.5 million in assets and charges a 1.33% management fee, data compiled by Bloomberg show.
Hong Kong’s crypto vision
As part of Hong Kong’s efforts to cultivate a crypto hub, authorities have licensed two crypto exchanges, which are able to facilitate retail trading on a limited basis. Managers of the city’s Bitcoin and Ether ETFs offer an in-kind subscription and redemption mechanism through which underlying cryptoassets can be swapped for ETF units and vice versa. US funds operate on a cash redemption model.
See also: Singapore Gulf Bank to raise funds, buy stablecoin payments firm
The total assets amassed by the six Bitcoin and Ether ETFs in Hong Kong currently stands at US$362 million, Bloomberg data show. By comparison, the spot-Bitcoin ETFs launched in the US in January have together amassed US$60.7 billion in assets so far.
CSOP expects demand for its inverse Bitcoin ETF to come from investors in Japan, Korea and Singapore, Chen said.
