A local cryptocurrency industry leader recommends suspending investment in digital assets as he expects the global market to face intense volatility in the near term from rate hikes and monetary policy tightening.
Poramin Insom, a founder of Satang Corporation, a cryptocurrency exchange operator, said three factors are determining the direction of the cryptocurrency market: interest rate hikes, inflation rates and US employment numbers.
He said all three factors are depressing market sentiment as the Federal Reserve is expected to raise interest rates by 0.5 percentage points at least twice, in June and July, as well as reduce its monthly asset purchases in the next 3-4 months to curb soaring inflation.
In addition to inflation, US monthly new employment figures excluding the agricultural sector or non-farm payroll have constantly hovered above 200,000 a month this year, indicating the Fed is likely to implement quicker rate hikes because the numbers suggest the US economy is strong enough to withstand the blow from a slowdown in asset markets, said Mr Poramin.
The collapse of TerraUSD and Luna caused a massive loss of confidence, with the global crypto market's value plummeting to US$1.2 trillion from a peak of $2.9 trillion in November 2021.
Total stablecoin trading volume is $69.2 billion at present, which accounts for 87.4% of total cryptocurrency trading volume as of May 26, according to CoinMarketCap.
The numbers suggest investors are using stablecoins -- asset-backed digital coins -- to store their funds amid intense volatility.
Mr Poramin said stablecoins such as USDC, USDT and BUSD are considered to be safe-haven assets as their prices are relatively sturdier than other digital coins such as Bitcoin as well as the weakening baht.
Moreover, gold stablecoins such as PAX GOLD (PAXG) are seeing investment because the spot gold price is expected to be heading towards $1,850 per ounce.
He said the price may hit $1,900-1,925 an ounce or even $2,000 because inflation remains high worldwide.
Mr Poramin said it remains difficult to determine when the crypto market will bounce back as the Fed will likely continue to raise interest rates until inflation is under control.
He said investors should wait a little longer before buying digital assets because the market is expected to continue on a downtrend for the next few months.
The market will remain volatile and prices will fluctuate, so investors must be very careful when making trading decisions, said Mr Poramin.