MANILA, Philippines — Bitcoin’s recent rally above its 2021 peak to $69,000 (P3.85 million) is driving up interest within the Philippine cryptocurrency space, attracting attention from larger financial institutions eager to join the sector.
The world’s most famous digital asset, famed and reviled for its wild price swings, is leading the charge while elevating the industry’s domestic players.
Philippine Digital Asset Exchange (PDAX), one of the largest cryptocurrency exchanges in the Philippines, has recorded a dramatic increase in activity in recent months, its founder and CEO Nichel Gaba said.
“We’re seeing triple or quadruple the volume these days,” Gaba, a former investment banker who established PDAX in 2018, told the Inquirer in an interview.
Long a haven for small investors with intense appetites for risk, Bitcoin is starting to lure the interest of large domestic institutions.
Financial institutions interested
“Locally, there are financial institutions who are starting to think about making a small allocation in Bitcoin. This is an insurance company and a couple of family offices,” Gaba said.
A family office is a private wealth management adviser that services ultra high net worth individuals.
Gaba said PDAX has more than two million users, which is several times the size of the country’s biggest stock brokerage houses, underscoring the sector’s growing popularity among Filipinos.
READ: Dollar slips as data weighs; bitcoin retreats after hitting new high
He said the exchange’s monthly volumes reach more than $100 million or about P6 billion, smaller than volumes on the Philippine Stock Exchange, due to the absence of large institutions.
Nevertheless, Bitcoin and alternative digital tokens known as Altcoins are bringing significant competition to the PSE.
“The attention of retail investors is really divided between crypto and Philippine equities,” Nicky Franco, head of research at stock brokerage house Abacus Securities, said earlier this year.
“Of course, we prefer that retail investors focus on equities but we really can’t blame retail investors who are taking advantage of the opportunities provided in the crypto space,” he added.
Crypto vs equities
Over the past year, Bitcoin’s price surged over 230 percent to a record high last Tuesday, fuelled by massive inflows after US regulators allowed the establishment of Bitcoin exchange traded funds early this year.
READ: Mystery, scandals and speculation: bitcoin’s record
The price immediately plunged more than 14 percent but has recovered to around $66,200 on Thursday.
“It validates one of the views heading into this cycle, which was that the approval of the ETFs will bring in a lot of traditional and institutional investors,” Gaba explained.
He said investors thinking of entering the space must always consider their exposure and appetite for risk.
“Don’t put in any money you’re afraid to lose because this is still a very volatile asset despite all of the excitement,” Gaba said.
Around 6.9 million Filipinos used cryptocurrencies in 2021, according to a report by the National Tax Research Center, which cited data from digital payments firm Triple-A.
Many Filipinos also have exposure in the industry through allied digital assets known as non-fungible tokens or NFTs. The most popular of these is the NFT game Axie Infinity, which lured tens of thousands of Filipinos seeking extra income during the pandemic.
As the value of Axie’s native Altcoin plummeted during the cryptocurrency bear market in 2022, numerous participants suffered losses and left the game.
Meanwhile, the Securities and Exchange Commission is cracking down on unregistered exchanges, including leading global platform Binance, if these fail to secure the necessary licenses to operate.
The SEC warning last November came a week after Binance CEO Changpeng Zhao’s guilty plea to breaches of US anti-money laundering regulations, which led him to resign.