Digital currencies could be in a bubble this year, with prices inflating and new investors flocking to the market, especially if prices hit 3 million baht, warns Zipmex Thailand, a local digital asset exchange.
Zipmex chief executive Akalarp Yimwilai said more institutional investors and new traders are turning to investment in bitcoin and other altcoins to hedge against inflation being driven by continual US injections of cash into the economy.
As the supply of fiat money increases while the supply of bitcoin declines, more new participants will flock to the cryptocurrency market as a safe haven against inflation, driving the price up.
The bitcoin price could surpass 3 million baht, given the increasing demand from large companies and institutional investors for the digital currency, he said.
"When the price hits 3 million baht, investors need to exercise caution because the bubble might burst. It has happened two times before, following the halvings in 2012 and 2016," Mr Akalarp said.
Bitcoin halving is an event where the supply generated from bitcoin mining is halved. It is set to happen once every 210,000 blocks are mined, or roughly four years.
In May 2020, the supply of bitcoin was cut to 6.725 coins, from 12.5 coins, per 10 minutes.
He said the market will turn bearish for a period of time until the next halving, which is expected around 2024, creating a cyclical downturn for the crypto market.
Mr Akalarp said bitcoin price could become stable in the future, like other traditional assets. However, it would take about a decade for bitcoin to adjust to the market price mechanism.
For altcoins or other cryptocurrencies beside bitcoin, 95% of them could end up failing as they are unlikely to be accepted by the market, he said. Only 5% are expected to survive, which is among the risks for investors.
In Thailand, digital assets are expected to grow based on stronger regulations and infrastructures, the ongoing injection of fiat money, and technology innovations, said Mr Akalarp.
"The market will grow following the launch of digital coins issued by large Thai companies," he said.
Zipmex Thailand is focused on digital exchange business, aiming to increase its customers to 100,000 accounts by this year. In the second quarter, the company plans to launch Zippay, a partnership with a local bank allowing customers to pay for goods and services with cryptocoins.