Is there a turning point in the cryptocurrency market?
After surviving the “Five Poor and Six Desperate”, the cryptocurrency market in July did not welcome a turnaround as expected. On the contrary, negative events such as the German government’s sale of assets and Mt.Gox’s repayment have triggered panic among investors, leading to a sharp decline in the entire cryptocurrency market.
At a time when investor confidence has been severely hit, multiple positive factors such as the $16 billion FTX repayment plan, expectations of interest rate cuts, and the US election results are believed to bring a turning point in the cryptocurrency market starting from the fourth quarter of 2024.
The $16 billion FTX repayment plan may drive the market to new highs
According to the revised restructuring plan and disclosure statement submitted by FTX to the US bankruptcy court in Delaware in May this year, the total value of the assets expected to be collected, converted into cash, and available for distribution is estimated to be between $14.5 billion and $16.3 billion, exceeding the $11 billion owed by FTX to its customers and other non-government creditors. The excess cash will be used to pay interest to over 2 million customers of the company.
If the plan is approved by the bankruptcy court, it is expected that 98% of FTX creditors will receive approximately 118% of their allowed claim amount within 60 days after the plan takes effect. However, due to differing opinions among FTX creditors, a consensus has not yet been reached on the method of compensation.
Currently, FTX has obtained court approval, and creditors can vote on the compensation plan for cryptocurrency in cash or in kind. According to court documents, creditors must vote by August 16th, and Judge Dorsey will decide whether to approve the plan on October 7th. Once the court approves the restructuring plan, FTX will repay the creditors within two months. Based on the timeline, it is estimated that FTX repayment will occur in the fourth quarter of 2024 or the first quarter of 2025.
Although the final method of compensation has not been determined, cryptocurrency analyst Ash Crypto believes that since most FTX customers are cryptocurrency enthusiasts, the $16 billion in funds will enter the cryptocurrency market and become the biggest catalyst for price increases. Bitcoin is expected to break through $120,000, Ethereum will surpass $12,000, and other altcoins will rise by 10 to 50 times.
Expectations of interest rate cuts increase within the year, with a probability of rate cuts in September exceeding 70%
Fed rate hikes and rate cuts are important factors affecting Bitcoin prices, and rate cuts often drive the market to strengthen.
Recently, Fed Chairman Powell stated that recent inflation pressures in the United States have eased, but the Fed still needs more data to prove that inflation risks are behind us before deciding to cut rates. If rates are cut too early, inflation may rise again; if rates are cut too late, it may lead to a slowdown in economic growth and trigger a recession.
Although Powell stated that the timing of rate cuts is still uncertain, with the latest data showing a slowdown in US economic growth, such as the significant downward revision of US non-farm payrolls data in June, and the unemployment rate rising to 4.1%, the highest level since November 2021, expectations of rate cuts have increased.
For example, analysts at Citigroup expect the Fed to cut rates by 25 basis points at each meeting starting from September, with a total of eight rate cuts until July 2025. This would lower the benchmark rate by 200 basis points, from the current 5.25%-5.5% to 3.25%-3.5%, and keep it unchanged for the remaining time in 2025. QCP Capital also stated in its latest market analysis that US employment data showed downward revisions for April and May, confirming Powell’s path of monetary tightening and the possibility of early rate cuts, with increased probability of rate cuts in September and December. In addition, in the latest Fed interest rate meeting, 7 out of 19 officials predicted that the Fed would cut rates once this year, and 8 supported two rate cuts.
According to the CME Group’s FedWatch Tool, as of July 9th, the probability of the Fed cutting rates at the September meeting has risen to 73.6%, while the probability of no action is 22.9%.
The first edition of the US cryptocurrency accounting system will take effect in 2025
In December of last year, the Financial Accounting Standards Board (FASB) in the United States announced the first edition of cryptocurrency accounting rules, which require companies holding Bitcoin or Ethereum to record their value at fair value, with changes reflected in net income. The new rules will take effect in fiscal years starting after December 15, 2024 and apply to both listed and unlisted companies in 2025.
For cryptocurrency assets, the change in accounting standards means that companies including MicroStrategy, Tesla, and Block will be able to record the high and low values of their cryptocurrency holdings. Under the new regulations, companies holding cryptocurrencies such as Bitcoin or Ethereum will need to record these tokens at fair value, which is the latest market value, and changes in fair value will directly impact net income.
In response, MicroStrategy founder Michael Saylor stated that this move will promote global companies adopting Bitcoin as a treasury reserve asset. Former PayPal President David Marcus also believes that the new regulations will remove a major obstacle for companies to include Bitcoin on their balance sheets, marking an important milestone for Bitcoin.
Trump’s chances of winning the election are rising, and cryptocurrency becomes a new chip in the election
2024 is an election year, with the US election being the most watched in the world, and the US presidential election will take place on November 5th. In this election, cryptocurrencies have become an important issue, as not only Trump has shown a positive embrace of cryptocurrencies and even expressed his desire to become the “Cryptocurrency President”, but the Biden administration has also sent friendly signals. The shift in the US political landscape has brought positive effects on the development of the cryptocurrency market.
Currently, the speculation about Biden “withdrawing from the race” continues to ferment, with Democratic members of the US House of Representatives calling for Biden to withdraw from the presidential election, and Senator Warner leading the campaign for Biden’s withdrawal. Although Biden publicly refused to withdraw, Trump’s chances of winning noticeably increased after the first televised debate, and in the second quarter fundraising, Trump raised $331 million, exceeding the $264 million raised by Biden and the Democratic National Committee.
Trump’s victory is believed to bring new upward momentum to the cryptocurrency market. Standard Chartered Bank stated that August 4th is a key date for Biden’s decision, and if he withdraws from the race, it will bring more favorable policies for the cryptocurrency market, potentially driving Bitcoin to new highs. They also predicted that Bitcoin could reach $200,000 in 2025.
In addition, the official platform of the Republican National Committee for the 2024 US election stated that they will support multiple policy measures favorable to cryptocurrency companies and holders. The Trump campaign team’s official document released recently stated that the Republican Party’s “Make America Great Again” platform pledges to end the “illegal and un-American attacks” on the US cryptocurrency industry and promises to “defend the right to transact privately without government surveillance and control.”
