Ethereum Sinks Against Bitcoin

Ethereum is at a three-year low compared to Bitcoin. Can Hong Kong’s ETH ETFs change the game?

China launches its Bitcoin & Ethereum ETFs

Hong Kong has given the green light this Monday to several Bitcoin and Ethereum ETFs. The funds involved are China Asset Management, Harvest Global, Bosera, and HashKey.

The major investment fund China Asset Management has received in-principle approval from the Hong Kong Securities and Futures Commission (SFC), but the official launch date of its ETFs is not yet known.

The arrival of Chinese ETFs is promising given the 60% appreciation of Bitcoin since the launch of their American counterparts. But will the volumes compete with those of BlackRock and Fidelity? The collective American ETFs have already attracted over 12 billion dollars net.

As we previously highlighted earlier: “The total Hong Kong ETFs weigh 450 billion dollars, compared to more than 6,400 billion in the United States…”

In other words, if these proportions are maintained, we can expect an increase of about 7% in the volume of bitcoins absorbed by the ETFs.

However, demand may surprise given that the Chinese have been deprived of bitcoins since the “ban” of 2021. Exchanges for buying Bitcoin are indeed banned in mainland China.

Hong Kong will act as a release valve. Consequently, it is not impossible that the volumes will be significant. Especially since the Shanghai stock market, which has been dull for several years now, offers paltry returns.

A breath of fresh air for Ethereum?

The chances of the SEC approving an Ethereum ETF are extremely slim. Remember that it took Grayscale winning its lawsuit against the SEC for the Bitcoin ETF to come into existence. However, no legal proceedings are currently underway regarding Ethereum ETFs.

Worse, the SEC is closely scrutinizing potential misconduct by the Ethereum Foundation, based in Switzerland. Suffice it to say that the likelihood of an Ethereum ETF is currently very slim in the United States.

Bloomberg Intelligence analysts who predicted the approval of Bitcoin ETFs believe that Ethereum ETFs will not have this opportunity. At least not right away. They cite, among other things, the lack of consultations between the SEC and investment funds.

“We now believe that these ETFs will ultimately be rejected on May 23rd”, wrote James Seyffart, ETF analyst at Bloomberg Intelligence. He and his colleague Eric Balchunas had previously given a 35% chance of approval in May.

Thus, the more laborious rise of ETH, which does not benefit from billions from Wall Street. ETH has lost more than 40% against Bitcoin since the switch to Proof of Stake.

That is an average fall of nearly 3% per month, bringing it to a three-year low compared to Bitcoin:

Ethereum $ETH plummets to lowest valuation against Bitcoin $BTC in 3 years pic.twitter.com/mwOs4k6W4d

— Barchart (@Barchart) April 14, 2024

In summary, ETH could fall less quickly against Bitcoin thanks to these new Chinese ETFs. But once again, Hong Kong is a small player compared to New York.