According to various reports, Hong Kong traders are shifting their attention away from domestic markets and are instead focussing on bitcoin futures contracts in America. Some believe that this trend could perhaps be attributed to Hong Kong traders’ conception that American futures markets are less regulated than their Hong Kong counterparts.
Demand for US bitcoin futures surge in Hong Kong
In an interview with the South China Morning Post, Gary Cheung, who serves as chairman of the Hong Kong Stockbrokers Association, stated that all domestic brokerages who offer bitcoin futures contracts have reported that there has been a marked increase in trading interest in US futures markets.
Cheung added that generally speaking, two kinds of traders have the incentive to focus on US-based futures contracts. This includes miners and other investors and traders who intend to use futures contracts to hedge. The second group is investors who specialize in futures products and wish to make more profit by expanding their speculative futures trading portfolio.
TD Ameritrade’s chief executive officer, Gary Leung confirmed this growing demand of Hong Kong traders and added that their company had received several inquiries about bitcoin futures investment opportunities ever since they opened up shop in October 2017 in Hong Kong during the bitcoin price increase.
Hong Kong investors shifting from local markets because of a lack of regulation
In Hong Kong, cryptocurrencies are considered a commodity which takes them out of the jurisdiction of the Hong Kong Monetary Authority. This factor has led several investors to seek alternative options in international markets whose regulation is even more lenient than that of Hong Kong’s.
The China Securities International Finance Holdings representative, Benny May, stated that investors were concerned over domestic markets since cryptocurrencies were not regulated in Hong Kong as they are treated as commodities. This means that investors are not offered any protection in the event of suffering a loss at the hands of malicious attackers or extraordinarily volatile market. The lack of regulation has convinced many Hong Kong traders to seek more secure investment opportunities elsewhere.
Hong Kong investors have been particularly focussed on US exchanges, which are much more regulated than their Hong Kong counterparts. While futures contracts in the US are still subject to cryptocurrency’s inherent market volatility, the counterparty risk is significantly less. This has made the US market more appealing to Hong Kong traders and investors.
The Haitong International senior vice-president, Jasper Lo Cho-yan, recently suggested that the current shifting market environment could also perhaps be contributing to the fact that Hong Kong traders are migrating from local crypto endeavors and focussing on the international market instead.
The vice-president noted that during the height of the crypto craze in December 2017, the market was boom and optimistic, however, after the subsequent price decline, most investors are struggling to make the same kind of profits. This has not been helped by tightening regulation by governments all over the world and has caused many financial experts to question the future of cryptocurrencies.