Day by day, spot ETFs are breaking records in trading volume and investments attracted. On February 28, net inflows into Bitcoin funds reached $673 million, surpassing the first day launches of new products. Among the funds, IBIT by BlackRock (iShares Bitcoin ETF, NASDAQ: IBIT) hit a daily record of $612 million. The daily turnover of spot funds also reached an unprecedented height of $7.7 billion on February 26.
Bloomberg’s senior ETF analyst Eric Balchunas added futures ETF data to the chart to compare trading volumes since the launch of the BITO fund in 2021 with the current frenzy. The surge of interest in Bitcoin this week has been so strong that leading American crypto exchanges have faced technical difficulties in serving clients.
Coinbase CEO Brian Armstrong announced yesterday on X that the traffic spike exceeded average levels by more than 10 times, catching the company off guard.
With Bitcoin poised to soon update its historical high amid increased demand, investment firms and experts are revising their forecasts upwards. For instance, veteran trader Peter Brandt has revised his target for next year from $120,000 to $200,000.
Bitwise CEO Hunter Horsley has adjusted the long-term target to $250,000, although without specifying a timeframe. He explained the bullish sentiment:
“The ETF launch marked Bitcoin’s IPO moment. For 15 years, the asset was only available to a select few, but now anyone in the financial markets can invest in it with the push of a button.”
In confirmation of his words, it was recently announced that Morgan Stanley, one of the largest brokers in the United States, is conducting a comprehensive review to add spot ETFs to its trading platform. If brokers universally include Bitcoin as an investment asset, spot ETFs are projected to attract investments ranging from $50 billion to $120 billion over five years, according to various estimates. Currently, after less than two months, they have amassed $7.4 billion.
However, this doesn’t imply that regulatory scrutiny of the industry will diminish anytime soon.
Consider Hong Kong as an example. Despite the city’s stated goal of becoming a digital asset hub, many cryptocurrency firms are likely to face challenges, highlighting once again the complex nature of the industry.
Recent indications from officials suggest that strict regulations will be imposed on the numerous small shops and ATMs scattered throughout the city that facilitate cash-to-crypto exchanges. These walk-in establishments are popular because they typically conduct minimal checks on customers, raising concerns about potential violations such as exceeding Beijing’s restrictions on outgoing transfers for Chinese nationals.
The proposed regulatory framework, to be administered by the customs department, will compel service providers to maintain detailed records of customers and transactions while increasing staffing to monitor for illicit activities such as money laundering. The resulting increase in operational expenses, coupled with customer apprehensions regarding heightened visibility, may spell the end for these often diminutive outlets tucked away in shopping complexes.
These shops and ATMs offering crypto-fiat conversions fall under the umbrella of over-the-counter (OTC) crypto trading, which constituted the majority of the $64 billion in cryptocurrency inflows Hong Kong received in the year ending June, according to Chainalysis data.
Officials in Hong Kong are pushing for more trading through licensed digital-asset exchanges to align with crypto regulations introduced in mid-2023. Only two platforms are currently licensed, but 21 more have applied before the February 29 deadline.
This regulatory framework aims to create a well-regulated crypto hub with transparent transactions and investor protection. However, the presence of under-scrutiny crypto shops suggests some demand for digital assets stems from those seeking anonymity, potentially hindering the transition to authorized channels.
Despite stricter regulations often reducing illicit activity, challenges persist as individuals may still attempt to circumvent rules. This remains a significant issue for the crypto industry, locally and globally, regardless of Bitcoin’s price.
