The market awaits the "strong stimulus": Hong Kong virtual asset spot ETF

Author: Bitpush News, Mary Liu

The cryptocurrency market showed weakness during weekend trading, with Bitcoin's trading price continuing to stay below $63,000 on Monday. The launch of the Hong Kong virtual asset ETF is imminent, and investors are waiting for it to bring more liquidity to the crypto market. However, analysts warn that the lack of positive catalysts amid growing concerns over U.S. inflation could lead to further declines in coin prices.

Data from Bitpush shows that Bitcoin fell below the support level of $63,600 early Monday morning, dropping to an intraday low of $61,750 in the afternoon. Bulls rushed in to prevent further pullbacks, and Bitcoin briefly rebounded above $63,000. As of the time of writing, it has again fallen below $63,000, with a 24-hour decline of 1%.

In the face of Bitcoin's weakness, altcoins were hit hard, with only 10 of the top 200 tokens by market capitalization showing gains on Monday. Amp (AMP) performed the best, rising by 18.75%, followed by BinaryX (BNX) with a 6.4% increase, and Helium (HNT) with a 5.7% rise.

The overall cryptocurrency market capitalization currently stands at $2.32 trillion, with Bitcoin's market dominance at 53.4%.

U.S. stocks experienced significant volatility during the day, initially trending higher at the open but then coming under pressure and losing gains around midday. This decline followed the U.S. Treasury's upward revision of its federal borrowing estimate for the quarter by $41 billion to $243 billion.

As a result, the yield on the 10-year Treasury note rebounded to 4.65% after dropping to 4.613% earlier in the trading day. It has since trended lower, trading at 4.607% as of the time of writing. By the close, the S&P, Dow Jones, and Nasdaq all finished higher, gaining 0.32%, 0.38%, and 0.35%, respectively.

Hong Kong Spot Crypto ETFs Set to Launch

Hong Kong's spot Bitcoin and Ethereum ETFs will begin trading on Tuesday morning local time. As of the time of writing, there has not yet been a frenzy in coin prices and trading volume similar to that seen with the U.S. spot Bitcoin ETF prior to its debut on January 11. In the three months leading up to the launch of the U.S. spot Bitcoin ETF, BTC prices nearly doubled, with a significant influx of funds driving BTC to break above $73,000 in March.

However, the issuers in Hong Kong are confident. According to Zhitong Finance, Zhu Haokang, head of digital asset management and family wealth at Huaxia (Hong Kong), stated that aside from Grayscale, the other 10 U.S. Bitcoin spot ETF issuers had a total issuance scale of $125 million on the first day, and the three issuers in Hong Kong are expected to exceed this figure, with Huaxia Fund's scale being the largest among the three.

Unlike U.S. products, Hong Kong's spot ETFs allow for cash and physical subscriptions or redemptions. Huaxia's ETF is the only one offering three counters in USD, HKD, and RMB, and it is also the only issuer with non-listed shares. Many traditional crypto asset investors are actively participating in its IOP (Initial Offering) phase. Bitcoin miners and investors from regions outside Hong Kong, such as Singapore and the Middle East, as well as local family offices, are all interested in investing in its ETF.

Analysts expect that the asset management scale of Hong Kong's spot Bitcoin and Ethereum ETFs could reach $1 billion in the future, but whether this goal can be achieved will require time to test.

Focus on Key Economic Data This Week

Looking ahead to the broader market, Secure Digital Markets stated: "The focus of the market is on the upcoming corporate earnings reports, important employment data, and the Federal Reserve meeting."

They noted: "This week's earnings focus includes major reports from PayPal and Amazon on Tuesday, as well as major earnings reports from Apple, Coinbase, and Block on Thursday. Monetary policy will also attract market attention, with the Fed expected to announce on Wednesday that it will maintain interest rates. Although no changes in rates are anticipated, investors will closely watch Chairman Jerome Powell's remarks at the subsequent press conference."

Analysts summarized: "This expectation has formed ahead of the release of the April non-farm payroll report on Friday, which is a key indicator of labor market strength and a critical factor in the Fed's policy decisions and overall economic assessment."

Bullish Target: Above $67,500

Analysts stated: "Bitcoin is currently showing a downward trend, with lower highs and lower lows on the intraday chart, rebounding from today's low of $61,800. It remains pressured below the 20-day and 50-day moving averages, indicating bearish momentum."

The uncertainty of future interest rates is a major source of volatility. Analysts wrote: "The combination of sluggish growth and persistent inflation reduces the likelihood of the Fed cutting rates, casting a shadow over risk assets. Bulls need to rebound above $67,500 to regain dominance.

The reversal of ETF flows has also put pressure on Bitcoin's price, translating into weakness across the entire cryptocurrency market. Last Friday, there was a significant outflow of funds from Bitcoin ETFs, totaling $83.6 million, with Grayscale alone accounting for $82.4 million. BlackRock faced its third consecutive day without any inflows.

Economist and cryptocurrency trader Milkybull Crypto stated that Bitcoin's current weakness may be "the last shakeout before a rebound to the cycle top."

He remarked: "If you look at the PA from 2017, when it broke a new record, you will find that there was a healthy, liquidity-attracting pullback before it rebounded to the cycle top."

Milkybull Crypto added: "The consolidation that started from December 2023 to February 2024 also reflects the current range of consolidation. The MM's manipulation strategy is to shake out STHs that are very sensitive to price adjustments, especially when prices are below their cost basis. The liquidity contest area: $57,000 to $59,000; STH cost basis: $59,788. These are important areas to watch during the final shakeout."