Asian Crypto Venture Firms Launch $128M ETF Liquidity Fund in Hong Kong

Crypto Reporter

Shalini Nagarajan

Crypto Reporter

Shalini Nagarajan

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Shalini is a crypto reporter who provides in-depth reports on daily developments and regulatory shifts in the cryptocurrency sector.

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Last updated: 

May 7, 2024

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Three Asian-based ventures have joined forces to launch Hong Kong’s first-ever ETF liquidity fund. The fund is valued at HK$1b (about $128m), according to a statement published Wednesday.

LD Capital and Antalpha Ventures, along with quant trading firm Highblock, have teamed up for the market-making service. Their liquidity fund aims to boost market activity for Hong Kong crypto ETFs. It will ensure smoother trading and more efficient movement of capital within the Hong Kong ETF market, the statement said.

How ETF Liquidity Funds Keep Crypto Trading Smooth

ETF liquidity funds boost trading ease for specific ETFs by acting like market makers. They collect investor cash and use it to actively buy and sell shares of those ETFs. This constant buying and selling creates a smoother market for the target ETF. As a result, investors can more easily jump in or out of their positions in the ETF without facing big price changes.

Some examples of crypto ETF liquidity funds include B2Broker, Flow Traders, and Virtu Financial. Jane Street emerged as a top choice for authorized participants among US Bitcoin ETF issuers. This means it was frequently listed by companies applying to launch Bitcoin ETFs in the US.

These funds help create and redeem shares and keep the market flowing by offering constant market-making services.

Hong Kong’s Crypto ETFs Attract Diverse Investors

The liquidity fund’s launch comes as Hong Kong is pushing hard to be a center for digital assets. The Securities and Futures Commission (SFC) just greenlit a wave of cryptocurrency ETFs from several fund managers, with some funds starting trade on April 30.

These new crypto ETFs are off to a strong start, racking up $230m in assets under management (AUM) within their first week. China Asset Management (China AMC) is leading the pack, with its Bitcoin ETF attracting $116m and its Ethereum ETF pulling in $19m.

The city’s new ETFs could see a surge in demand from several corners. Big money from Chinese wealth parked in the city could be a major driver. Additionally, Asia-Pacific crypto exchanges and market makers might jump in, fueling further activity.