Three recently approved spot Bitcoin (BTC) and Ether (ETH) exchange-traded funds (ETFs) in Hong Kong may not be as big of a deal as some may think, according to senior Bloomberg ETF analyst Eric Balchunas.

On April 15, The Hong Kong Securities and Futures Commission (SFC) issued conditional approvals to three offshore Chinese asset managers to begin issuing spot Bitcoin and Ether ETFs. The asset managers cleared for approval include Harvest Fund Management, Bosera Asset Management, and China Asset Management. 

However, in an April 15 post to X, Balchunas shot down lofty predictions that the ETFs could generate $25 billion in inflows and pointed to four main reasons why crypto investors should temper their expectations for the recently approved products.

“Don't expect a lot of flows — I saw one estimate of $25b that's insane. We think they'll be lucky to get $500m.”

Justifying his predictions, Balchunas explained that the Hong Kong ETF market is “tiny” when compared to countries like the United States, adding that these ETFs don’t allow Chinese retail investors with official access to the products.

Balchunas noted these three prospective ETF issuers were tiny relative to “big fish” asset management giants such as BlackRock — which currently boasts more than $9 trillion in assets under management.

“U.S. spot bitcoin ETFs have more assets than the entire HK ETF market,” wrote Balchunas in a follow-up post to X.

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Additionally, Balchunas said the capital environment for these funds was far less efficient than elsewhere, and fees would likely be set around the 1-2% mark — a far cry from the “dirt cheap fees in the U.S. Terrordome.”

“The underlying ecosystem there is less [liquidity] efficient = these ETFs will likely see wide spreads and prem discounts,” said Balchunas.

“Takeaway: Other countries adding [Bitcoin] ETFs is no doubt additive but it's nickel-dime compared to the mighty US market.”

On the other hand, the chief crypto analyst at Real Vision and former crypto analyst at Bloomberg Intelligence, Jamie Coutts, said that despite recent reservations at the size of the Hong Kong ETF market, the products would open up a “massive pool of capital” for Chinese investors, who Coutts says are already savvy with skirting government-imposed capital controls.

Notably, the Hong Kong FSC approved the spot Bitcoin and Ether ETFs to be launched using an in-kind model, meaning new ETF shares can be issued directly using BTC and ETH.

The in-kind creation model stands in contrast to the cash-create redemption model, which allows issuers to create new ETF shares only with cash. U.S. spot Bitcoin ETFs currently use the cash-create model, with the SEC fearing that cash-create could lead to money laundering and fraud-related issues.

The spot ETFs are slated for launch in roughly two weeks' time.

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