Ongoing trade tensions and fears of stagflation have led to a 20% drop in the price of Bitcoin, the leading cryptocurrency, during the first quarter of this year, with analysts predicting further declines in the second quarter.
According to Woramet Chansen, an investment advisor at Merkle Capital, Thailand’s first digital asset fund manager, this decline occurs against a backdrop of slowing economic growth and interest rate cuts by the US Federal Reserve, which are happening at a more gradual pace than the market expected.
In March, digital assets experienced significant volatility, with Bitcoin reaching a low of $76,600, the lowest price seen in four months. The altcoin market was also affected, as Ethereum, the second-largest cryptocurrency, fell 55% from its recent peak, hitting a 16-month low. This sharp correction indicates rising concerns among investors regarding risk assets, Chansen noted.
Key factors driving this downturn include signals from the Fed that rate cuts may be implemented more slowly than anticipated and increasing apprehension regarding stagflation, characterized by stagnant growth coupled with high inflation.
Looking forward, Merkle Capital expects the market to remain pressured in the second quarter. However, this may signal a potential bottom, paving the way for mid-term growth opportunities, according to Chansen.
The minutes from the Fed’s recent Federal Open Market Committee meeting revealed that the US economy is anticipated to grow more slowly than previously projected, while inflation is proving to be higher than expected. This macroeconomic environment raises the risk of stagflation, which has further pressured risk assets, particularly in late March.
In the medium to long term, clearer indicators regarding the economic outlook and inflation could help create a more stable investment environment, as stated by Merkle Capital.
Despite recent corrections, Bitcoin and Ethereum could still offer attractive investment opportunities for the medium to long term. Bitcoin, in particular, continues to attract interest ahead of the upcoming halving, which may alter market dynamics and liquidity, according to Chansen.
Merkle Capital cautioned that digital assets carry significant risks, urging investors to carefully evaluate their risk tolerance and carry out thorough research before making investments.
The Securities and Exchange Commission reported that Thailand’s digital asset market was valued at 73.6 billion baht in March, reflecting a 4.45% decline compared to February. The average daily trading volume also fell to 1.82 billion baht, representing a 20.2% decrease, with the number of active trading accounts dropping to 151,000—a 13.1% month-on-month decline.
Globally, the digital asset market was valued at $2.82 trillion in March, down 5.2%. The average daily trading volume decreased to $18.4 billion, a 26.5% drop. The market remains highly concentrated, with Bitcoin representing 58.1%, Ethereum 7.8%, and USDT 5.10% of the total market capitalization.
