Bloomberg Intelligence analysts have indicated that investors in mainland China are unlikely to have access to the newly approved Hong Kong-listed spot bitcoin ETFs, dampening expectations of substantial demand and potential market impact.

China's stringent stance on cryptocurrencies, including the ban on trading and mining activities since 2021, serves as a major obstacle to mainland Chinese investors participating in Hong Kong's bitcoin ETF market. Despite the recent approval of ETFs by Hong Kong regulators, the Securities and Futures Commission (SFC) has maintained silence on the matter, leading to uncertainty regarding accessibility.

The approval of ETFs by issuers such as ChinaAMC, Harvest Global, and Bosera International has sparked anticipation among bitcoin bulls, who viewed it as a significant catalyst for price appreciation. However, recent reports suggest that "southbound funds," representing investments from mainland China, will not be permitted to purchase these ETFs.

While the launch of spot bitcoin ETFs in Hong Kong is a positive development for the industry, its impact may be limited due to the relatively small size of the city's ETF market compared to the U.S. market. Analysts estimate that combined flows are unlikely to exceed $1 billion, significantly lower than earlier predictions of up to $25 billion in demand from Chinese investors.

Matt Hougan, Chief Investment Officer at Bitwise, views Hong Kong ETFs as positive but not transformative for the market. The disparity in scale between the U.S. and Hong Kong ETF markets underscores the challenges in achieving significant capital inflows.

Despite the potential for institutional investors to leverage Hong Kong ETFs for additional trading hours, institutional holdings of bitcoin ETFs remain relatively modest. Consequently, the anticipated impact of these ETFs may fall short of expectations, signaling a more subdued market response compared to initial projections.