Market crash hits crypto investors amid Hong Kong’s efforts to build virtual assets sector
Market Crash Hits Crypto Investors Amid Hong Kong’s Efforts to Build Virtual Assets Sector
The cryptocurrency market faced a significant downturn on Monday, leading to over US$1 billion in bullish crypto positions being liquidated within the past 24 hours. This steep decline in the crypto market comes at a time when Hong Kong is actively working to bolster its virtual assets sector.
Bitcoin and Ether Plummet
Bitcoin, the world’s largest cryptocurrency, experienced a sharp drop, briefly falling below US$50,000. This marked one of the most significant sell-offs in recent years, with Bitcoin’s value plummeting by 15 percent before making a mild recovery. Ether, the second-largest cryptocurrency, also suffered a severe decline, plunging nearly 20 percent on Monday.
The market downturn occurred amidst a global stock market rout triggered by fears of a US recession and a sharp rally of the Japanese yen. Bitcoin’s recent slump follows its peak in March this year when it reached an all-time high of nearly US$74,000. Over the past five days, Bitcoin’s value has dropped by almost 20 percent.
Impact on Hong Kong’s Crypto ETFs
The crypto crash had a pronounced effect on Hong Kong’s exchange-traded funds (ETFs) that directly track Bitcoin and Ether prices. ChinaAMC’s spot Bitcoin ETF recorded its largest single-day outflow of HK$35.19 million (US$4.5 million) since its debut in April. Additionally, three spot Bitcoin ETFs in Hong Kong saw their prices fall between 14 to 17 percent, while three spot Ether ETFs experienced over a 25 percent drop.
Market Sentiment and Investor Behavior
Jason Jiang, a senior researcher at OKG Research, noted that virtual asset spot ETFs have been a significant growth driver and source of funds in the recent crypto market cycle. However, the current capital outflows from global spot crypto ETFs suggest that mainstream investors are gradually exiting the market due to concerns about the US economic downturn, geopolitical issues, and substantial market selling pressure.
Hong Kong’s Strategic Moves
Since 2022, Hong Kong has been proactive in attracting virtual asset businesses as part of its broader efforts to sustain its status as a financial hub. Despite facing challenges in recent years, the city continues to innovate in the virtual asset space. Last week, Hong Kong Legislative Council member Johnny Ng Kit-chong proposed that regions, including Hong Kong, should consider incorporating digital assets into their strategic reserves. This suggestion follows former US President Donald Trump’s pledge to create a “strategic national Bitcoin stockpile.”
To stay competitive, Hong Kong regulators are contemplating allowing staking for spot Ether ETFs, enhancing their attractiveness. Last month, the city launched its first Bitcoin inverse investment product, which offers returns based on declines in Bitcoin’s price, further expanding its virtual asset product offerings to attract investors.
Conclusion
The recent market crash highlights the volatility of the cryptocurrency market and the challenges faced by investors. As Hong Kong continues to develop its virtual assets sector, it remains to be seen how these initiatives will impact the city’s financial landscape and its position in the global market.
Source: https: scmp.com
