Analysis of Market Dynamics and Impact of Bitcoin ETF

The Bitcoin ETF seeks balance amid market expectations and skepticism. The bullish narrative drove BTC to break previous highs, followed by profit-taking which led to a price correction, in line with the general rules of commodity markets.

From the perspective of commodity structure, key future issues regarding Bitcoin/Ethereum spot ETFs include:

1. Regulatory and Product Situation of Bitcoin/Ethereum ETFs in Hong Kong
2. The global trading volume of Bitcoin/Ethereum ETFs and the possibility of becoming a global spot delivery hub.
3. Interaction between traditional finance and the virtual asset market, sources of funds and potential, institutional layout situation

Comparison of Regulatory Frameworks

Different jurisdictions have varying attitudes towards virtual asset ETFs, reflecting differences in regulatory systems. Europe ( and Canada ) rely on centralized decision-making, while the United States has experienced a tug-of-war between the market and regulation.

Regulatory Framework Comparison:

| Country | Approval Time | Regulatory Agency | Reason | Approval Speed | |------|----------|----------|------|----------| | USA | January 2024 | CFTC, SEC | Commodity and securities disputes, regulatory jurisdiction issues | Slow | | Hong Kong | April 2024 | SFC | Regulatory Focus | Fast | | Canada | February 2021 | CSA | Regulatory System Unification | China |

Cryptocurrency ETF Comparison:

| | Hong Kong Spot ETF | US Spot ETF | Hong Kong Futures ETF | |--------------|--------------|--------------|--------------| | Underlying Position | BTC, ETH Spot | BTC Spot | BTC and ETH Futures | | Trading Currency | HKD, USD, CNY | USD | HKD | | Trading Time | Asia Time | US Time | Asia Time | | Redemption Method | Physical Cryptocurrency or Cash | Cash Only | Cash Only | | Unlisted Shares | Yes | No | No | | Trading platform regulation | SFC regulation | Not regulated by SEC | CME | | Custodian Regulation | SFC Regulation | Partially SEC Regulated | SFC Regulation | | Insurance | Yes | No | No | | Derivative Risk | None | None | High | | Rolling Cost | None | None | High | | Qualified Investor | Professional and Retail | Only Hong Kong Professional Investors | Professional and Retail |

Trading Benchmark Analysis

1. Quantitative Expectation: The Hong Kong Bitcoin ETF may reach a scale of 10 billion USD by the end of the year.

US ETF market size: 71900 billion dollars Hong Kong ETF market size: $52.1 billion Canada ETF market size: 30.1 billion USD

Maximum ETF size: US SPY: $503 billion Hong Kong Gold ETF: 59 billion USD Canada ZSP: $10 billion

Maximum BTC ETF scale: Grayscale in the U.S.: $26.4 billion Hong Kong expects: 10 billion USD Canada PURPOSE: 1.3 billion USD

2. Qualitative Analysis: The Hong Kong Bitcoin/Ethereum ETF has unique advantages

(1) The spot delivery mechanism provides arbitrage opportunities and increases liquidity.

• Helps virtual asset exchanges gain pricing power and expand price discovery.
• Promote the development of the futures market and improve the pricing mechanism.
• Promote the exchange to develop new tools and services

( Hong Kong has no capital gains tax, allowing investors to benefit more.

• U.S. ETF investments are subject to at least 30% withholding tax on dividends.
• Hong Kong defines cryptocurrency as "virtual goods" and does not impose capital gains tax.
• Frequent trading may be considered as income and subject to capital gains tax with a cap of 16.5%.

Market Impact of Bitcoin ETF

1. May exacerbate the outflow of funds from Hong Kong stocks

   • Reduce the liquidity of Hong Kong stocks, especially high-quality assets
   • Funds are shifting from traditional stocks to BTC/ETH ETF

2. Participation of state-owned assets is expected to improve financing and customer expansion.

   • Public fund's Hong Kong company has been approved to issue a virtual asset ETF
   • State-owned background provides credit endorsement, making it easy to gain investors' trust
   • May become a stabilizing force in the market

3. Promote the integration layout of the industry

   • Traditional financial institutions need to strengthen cooperation and expand the industrial chain.
   • Brokers can extend upstream to exchanges, reducing costs.
   • Develop innovative products such as Bitcoin ETF to expand profit channels

Conclusion

The virtual asset spot ETF is a milestone for the virtual asset market in Hong Kong, providing a channel for compliant funds to enter and enhancing the industry's image and legitimacy. This will increase market liquidity, promote innovative development, and help Hong Kong establish its position as a global Web3 financial center.