On July 23, the CSOP Bitcoin Future Daily (-1x) Inverse Product (7376.HK) will be listed as the first Bitcoin futures inverse product in Asia.
CSOP Asset Management has launched the new exchange-traded fund (ETF) which is designed to help investors to obtain profit from the decline in the price of Bitcoin. This is in line with the firm’s growth strategy in the Asia-Pacific region which saw the firm launch the CSOP Bitcoin Futures ETF (3066.HK) in December 2022.
Product Mechanism and Details
The index tracking of the CSOP Bitcoin Futures Daily (-1x) Inverse Product is to provide investment returns that are opposite of the daily performance of the S&P Bitcoin Futures Index. The inverse product accomplishes this through a futures-based replication strategy, which means that it invests in the spot-month Chicago Mercantile Exchange Bitcoin Futures.
From a CSOP company post on the 22nd of July, the product shall be offered on the HKEX at an estimated price of 7.8 HKD per unit. This product enables the professional investors to make gains out of the falls in the price of the Bitcoin especially the falls.
HKEX has been engaged in the trading of spot crypto ETFs since the last quarter of 2022 with the launching of CSOP’s Bitcoin Futures ETF and Ether Futures ETF. Both products have the same underlying which is Bitcoin and Ether futures cash-settled contracts on the CME.
Samsung Asset Management Hong Kong entered the fray just a month later with its Bitcoin Futures ETF in January 2023. Out of all these three future products, the HKEX crypto ETFs had gathered a total of 1.3 billion Hong Kong dollar which is equivalent to $170 million by April 29.
Brian Roberts of HKEX Exchange has suggested that the exchange is willing to list the leveraged and inverse of cryptos. He stressed the need for offering a variety of instruments for investments in the continuously developing crypto market.
Regulatory Environment and Investor Caution
Currently, the Hong Kong Securities and Futures Commission (SFC) is already in the process of implementing the regulation of the sector. The SFC has come up with a licensing framework for the centralized cryptocurrency trading platforms, and has pre-approached 11 entities. Nevertheless, 13 exchanges, including HKX, have also withdrawn their applications with the problems of compliance issues.
CSOP has also advised investors on the high risk of the inverse products, saying that the values of such a product could drop by more than 20% in a single trading session thus erasing investors’ capital. This caution emphasises the fact that such financial products are rather risky.
The Hong Kong Plan of Becoming a Crypto Hub
This move of listing CSOP’s Bitcoin inverse product is in line with the plans of Hong Kong to expand the range of financial instruments that are being offered in the market and strengthen its position as a key node for crypto business. This launch happens a few months after the city gave the nod for six Bitcoin and Ether-based ETFs.
Christopher Hui, Secretary for Financial Services and the Treasury Bureau (FSTB) revealed that there are plans to review laws to catch up with the market. The HKMA and the SFC intend to review the requirements on virtual asset-related activities from time to time as needed.
Moreover, the HKMA has been working on the regulation of stablecoins. On 17 July, the FSTB and HKMA published the findings of the public consultation on the regulation of stablecoins which took place for two months, stressing the authorities’ determination to address this new phenomenon.
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