Experts predict a substantial surge in Bitcoin exchange-traded funds (ETFs) following their launch in Hong Kong, attributing it to the adoption of in-kind creation models. Bloomberg's senior ETF analyst, Eric Balchunas, highlighted the potential for increased assets under management (AUM) and trading volume in the region due to Hong Kong's embrace of the in-kind creation model.

This viewpoint is supported by research from Bloomberg ETF analyst Rebecca Sin, who views the in-kind model as an advantageous opportunity for the market. Hong Kong's move towards in-kind creation stands in contrast to the cash-only approach in the US, potentially offering benefits for ETF development.

Earlier announcements from Hong Kong authorities indicated their readiness to accept spot crypto ETF applications, with plans for rollout by mid-year. Various entities, including Harvest Hong Kong, have already applied to launch spot Bitcoin ETFs. In-kind creation, as opposed to cash creation, allows ETF issuers to exchange underlying assets like Bitcoin with market makers, streamlining share creation and redemption without immediate asset liquidation.

This differs from the US SEC's preference for cash redemptions, which may present challenges in aligning share prices with Bitcoin's actual value, as highlighted by BlackRock, one of the Bitcoin ETF issuers.