The current landscape for crypto ETFs in the United States has been anything but smooth. Despite initial enthusiasm surrounding their launch in Asia, these exchange-traded funds, designed to track the performance of digital assets like Bitcoin (BTC) and Ethereum (ETH), have failed to ignite substantial investor interest.

At a blockchain conference in Taiwan last month, Desmond Yong, legal and compliance director at blockchain technology company Chainup, conducted a survey among approximately 100 attendees. Notably, not a single participant reported having invested in crypto ETFs. “It’s quite clear that ETFs are targeted at a very certain niche crowd,” Yong remarked, reflecting on his previous experience with the Monetary Authority of Singapore.

April saw a significant milestone as six crypto ETFs received regulatory approval in Hong Kong, marking their first appearance in Asia following U.S. acceptance earlier this year. However, by the end of August, all six funds had registered negative returns. Specifically, Bitcoin and Ether ETFs launched by Bosera HashKey, ChinaAMC, and Harvest experienced losses ranging from -5% to as low as -20%.

Yves Longchamp, head of research at Swiss trading service AMINA Bank, pointed out that demand has remained subdued since the launch of these ETFs. He attributes this lackluster demand to the persistent decline in cryptocurrency prices, which has likely deterred potential investors.

Several key factors contribute to the underperformance of crypto ETFs in Asia. Stephanie Leung, chief investment officer at fund management platform StashAway, identified high volatility as the primary concern affecting these funds. She noted that investor interest appears muted, with artificial intelligence stocks capturing more attention than digital assets.

Regulatory uncertainty in the U.S. has further dampened crypto investments. The Federal Reserve’s signals of possible interest rate cuts following a period of monetary tightening add another layer of complexity. While some analysts argue that lower interest rates could make riskier assets like Bitcoin and Ethereum more attractive, others warn it may indicate broader economic challenges such as a potential recession. Rania Gule, senior market analyst at broker XS.com, highlighted this duality in an August report.

In another August report, DBS Group Holdings, Southeast Asia’s largest bank by assets, emphasized the volatility of crypto markets and their increasing focus on U.S. elections for signs of greater acceptability. The report detailed Bitcoin’s price fluctuations: falling from $71,000 in early June to $55,000 in July before rebounding to $68,000 mid-July and then dropping again to $54,000 due to global financial market risk-aversion.

Despite these challenges, some experts remain optimistic about the future of crypto ETFs in Asia. Vivien Wong, a partner at HashKey Capital, suggested that the current high-interest rate environment might have made cryptocurrencies less appealing. However, she believes that the upcoming U.S. presidential election could provide a boost for digital assets, citing both leading candidates’ indications of a more favorable stance toward the industry. Wong also revealed that HashKey is in discussions with regulators about new ETF offerings and is exploring launching funds linked to other cryptocurrencies.

The situation isn’t much brighter in the U.S., where crypto ETFs have also faced significant hurdles recently. For instance, Bitcoin ETFs have experienced their longest streak of daily net outflows since their introduction earlier this year. Data from Bloomberg shows that investors withdrew nearly $1.2 billion from 12 Bitcoin ETFs over the eight days leading up to September 6 due to concerns about economic growth impacting stocks and commodities.

Similarly, Ethereum spot ETFs have seen consistent outflows since their launch. As of September 6, 2024, the cumulative net outflow was $568.30 million, with a daily net outflow of $5.98 million on the same day. While there were occasional inflows, such as $5.84 million on August 28, the overall trend has been predominantly negative. Despite this, total net assets for Ethereum ETFs remain over $6 billion.

In summary, while many investors believe that “time in the market” is a critical tool for growing wealth, it’s clear that crypto ETFs in Asia have yet to deliver promising results. With six ETFs introduced in Hong Kong in April showing negative returns by August and investor interest remaining low, analysts point to declining crypto prices and high volatility as significant deterrents. The uncertainty surrounding U.S. regulatory policies and the upcoming presidential election further complicates the outlook. Only time will reveal what the future holds for crypto ETFs.