Market crash hits crypto investors amid Hong Kong’s efforts to build virtual assets sector

Bitcoin, the world’s largest cryptocurrency token, briefly tumbled below US$50,000 on Monday during one of the worst global markets sell-off in years, hitting crypto investors amid Hong Kong’s efforts to boost its virtual assets sector.

Bitcoin at one point on Monday saw its value shed 15 per cent, with its price briefly dipping below US$50,000 for the first time in months before a mild rebound. Ether, the world’s second largest crypto token, plunged nearly 20 per cent on Monday.

The crypto crash came amid a global stock market rout on Monday that was triggered by US recession fears and a sharp rally of the Japanese yen.

The world’s top crypto coin has been in a slump recently after reaching an all time high of nearly US$74,000 in March this year, and its fall has deepened over the last week with its price dropping nearly 20 per cent over the past five days.

Crypto’s steep fall on Monday saw more than US$1 billion worth of bullish crypto positions held by investors liquidated in the past 24 hours, according to market data provider Coinglass.

The sell-off also hit Hong Kong’s exchange-traded funds (ETF) that directly track bitcoin and ether prices. ChinaAMC’s spot bitcoin ETF, for instance, on Monday saw its largest single-day outflow of HK$35.19 million (US$4.5 million) since the ETFs’ debut in April this year.

Three spot bitcoin ETFs available in Hong Kong plunged 14 per cent to 17 per cent in price on Monday, while the city’s three spot ether ETFs all took a nosedive of more than 25 per cent.

Virtual asset spot ETFs have been “the most important growth driver and external source of funds” in the crypto market’s recent cycle, according to Jason Jiang, a senior researcher at OKG Research, a unit under Hong Kong-listed blockchain firm OKG Technology Holdings.

Capital outflows among global spot crypto ETFs indicate that “mainstream investors are gradually exiting the cryptocurrency market due to concerns about the US economic downturn, geopolitical worries, and significant market selling pressure”, he said.

Since 2022, Hong Kong has charged ahead with initiatives aimed at drawing virtual asset businesses, part of the city’s broader efforts to maintain its appeal as a financial hub, a status that has taken a blow in recent years.

Hong Kong Legislative Council member Johnny Ng Kit-chong last week suggested on X, formerly Twitter, that countries and regions including Hong Kong consider “incorporating digital assets into their strategic reserves”.

Ng’s proposal came after former US president Donald Trump’s pledge in July to create a “strategic national bitcoin stockpile”.

The city last month also launched its first bitcoin inverse investment product, which offers returns based on declines in the price of the world’s largest cryptocurrency token, as it expands its virtual asset product offerings to draw investors.