Hong Kong won’t provide support: Bitcoin correction is gaining strength. Last week, outflows from cryptocurrency exchanges reached $126 million, with $83 million attributed to spot ETFs in the US. Yesterday only reinforced the trend with a result of -$37 million.
As long-term holders and miners continue to reduce their reserves, the price is heading downwards. Currently, Bitcoin’s decline stands at 15% from its peak reached in March. In April, the cryptocurrency gained a new argument against the correction – the launch of spot ETFs in Hong Kong in the next two weeks.
However, this factor isn’t entirely straightforward: Eric Balchunas from Bloomberg states that the Chinese product will attract investments of at best $500 million.
Key reasons for pessimism:
The entire ETF market in Hong Kong amounts to $50 billion. For comparison, BlackRock’s Bitcoin fund alone attracted $15.3 billion in three months. Access to ETFs will be blocked for investors from mainland China. The latest circumstance undoubtedly dashes optimistic forecasts of billions of dollars inflow, even considering some loopholes allowing enterprising citizens to invest in Hong Kong products.
The potential emergence of spot ETFs can be illustrated by the influx of investments into futures ETFs, which, like in the US, were launched much earlier. The total assets under management (AUM) of Hong Kong cryptocurrency funds amount to a modest $170 million. In the US, BITO alone gathered $2.8 billion. CoinFactiva analysts reported on the impact of halving and the associated correction risk a week earlier.
According to the estimation of the CoinFactiva.com’s analysts, a drop in revenues will force miners to reduce reserves by $5 billion within 4-6 months after halving.
All else being equal, this will create conditions for at least the consolidation of Bitcoin in the medium term. In the last week, outflows among spot ETFs are only shown by Grayscale, whose management fee exceeds competitors’ offerings by 5-6 times.
If investors of other funds hesitate and succumb to panic, the correction will easily reach the usual 30-40%, and Bitcoin will drop to around $50,000.
