Written by: Nancy, PANews
After enduring the "poor May and desperate June", the crypto market did not see the expected turnaround in July. On the contrary, negative events such as the German government's sell-off and Mt.Gox's repayment are causing investors to panic, and the decline of Bitcoin has led to a sharp drop in the crypto market.
At a time when investor confidence has suffered a severe blow, with the combined effects of FTX's repayment plan of up to US$16 billion, rising expectations of interest rate cuts, and the results of the US election, the crypto market is believed to be turning around from the fourth quarter of 2024.
$16 billion FTX repayment plan could push market to new highs
According to the revised reorganization plan and disclosure statement submitted by FTX to the U.S. Bankruptcy Court for the District of Delaware in May this year, it is estimated that the total value of property collected, converted into cash and available for distribution will be between US$14.5 billion and US$16.3 billion, which exceeds the US$11 billion owed by FTX to customers and other non-government creditors. The excess cash will be used to pay interest to the company's more than 2 million customers.
If the plan is approved by the bankruptcy court, the debtor expects that 98% of FTX's creditors will receive approximately 118% of their allowed claims within 60 days of the plan taking effect. However, due to the disagreement among FTX creditors, no consensus has been reached on the compensation method.
Currently, FTX has obtained court approval, and creditors can vote on starting a compensation plan to pay cryptocurrencies in cash or in kind. According to court documents, creditors must vote before August 16, and Judge Dorsey will decide whether to approve the plan on October 7. Once the court approves the reorganization plan, FTX will repay creditors within two months. According to the schedule, FTX is expected to repay between the fourth quarter of 2024 and the first quarter of 2025.
Although the final compensation method has not yet been determined, crypto analyst Ash Crypto believes that given that most FTX customers are cryptocurrency enthusiasts, the huge amount of $16 billion will enter the crypto market and become the biggest catalyst for price increases. Bitcoin is expected to break through $120,000, Ethereum will break through $12,000, and other altcoins will rise by more than 10 to 50 times.
Expectations for a rate cut this year are rising, with the probability of a rate cut in September exceeding 70%.
The Federal Reserve’s interest rate hikes and cuts are one of the important factors affecting the price of Bitcoin, and interest rate cuts often lead to a stronger market.
Not long ago, Fed Chairman Powell said that the recent inflationary pressure in the United States has eased, but the Fed needs more data to prove that the inflation risk has passed before deciding to cut interest rates. If the interest rate is cut too early, inflation may rise again; if the interest rate is cut too late, it may lead to slower economic growth and trigger an economic recession.
Although Powell said the timing of the rate cut is still uncertain, as the latest data released by the United States showed that the U.S. economic growth was slowing down, such as the significant downward revision of the U.S. non-farm employment data in June and the unemployment rate climbed to 4.1%, the highest level since November 2021, market expectations for rate cuts have also increased.
For example, analysts at Citi Research expect the Fed to cut interest rates by 25 basis points at each meeting starting in September, for a total of eight cuts until July 2025. This will reduce the benchmark interest rate by 200 basis points, from the current 5.25%-5.5% to 3.25%-3.5%, and remain unchanged for the rest of 2025; QCP Capital also said in its latest market analysis that U.S. employment data showed that both April and May data were revised downward, which confirmed Powell's deflationary path and the possibility of early rate cuts, and the probability of rate cuts in September and December increased. In addition, in the latest Fed interest rate meeting, 7 of the 19 officials expected the Fed to cut interest rates once this year, and 8 supported two rate cuts.
According to the CME's FedWatch Tool, as of July 9, the market expects the probability of the Federal Reserve cutting interest rates at the September meeting to have risen to 73.6%, and the probability of remaining on hold is 22.9%.
The first version of the US crypto accounting system will take effect in 2025
Last December, the U.S. Financial Accounting Standards Board (FASB) announced the first version of cryptocurrency accounting rules, requiring companies holding Bitcoin or Ethereum to record their currency values at fair value, with changes reflected in net income. The new rules will take effect in fiscal years beginning after December 15, 2024, and will apply to listed and unlisted companies in 2025.
For crypto assets, the change in accounting rules means companies including MicroStrategy, Tesla and Block will be able to record the highs and lows of the value of their cryptocurrency holdings. Under the new rules, companies holding cryptocurrencies such as Bitcoin or Ethereum will need to record these tokens at fair value, that is, the latest market value, and changes in fair value will be directly recorded in net income.
In response, MicroStrategy founder Michael Saylor wrote that this move will promote global companies to adopt Bitcoin as a treasury reserve asset; former PayPal president David Marcus also believes that the new regulations will eliminate a major obstacle for companies to include Bitcoin in their balance sheets, becoming an important milestone for Bitcoin.
Trump's chances of winning the election are rising, and cryptocurrency has become a new bargaining chip in the election
2024 is a general election year, and the US race has attracted the most attention from the world. The US presidential election will also take place on November 5. In this election, cryptocurrency has become an important issue. Not only has Trump shown a positive attitude towards cryptocurrency, he even expressed his intention to become the "crypto president". The Biden administration also followed closely and sent friendly signals. The change in the US political trend has had a positive impact on the development of the crypto market.
Currently, Biden's "withdrawal theory" continues to ferment, including several Democratic members of the U.S. House of Representatives calling on Biden to withdraw from the presidential election, and Senator Warner is also leading Biden's withdrawal from the campaign. Although Biden publicly refused to withdraw from the election, Trump's chances of winning have significantly increased after the first televised debate in the United States, and in the second quarter of fundraising, Trump raised $331 million, surpassing Biden and the Democratic National Committee's $264 million.
Trump's victory is believed to bring new upward momentum to the crypto market. Standard Chartered Bank said that August 4 is a key date for Biden to make a decision. If he withdraws from the election, it will bring policies that are more favorable to the cryptocurrency market, which may push Bitcoin to a new high and predict that it will reach $200,000 in 2025.
In addition, the Republican National Committee stated in its official platform for the 2024 US election that it will support a number of policy measures that are beneficial to crypto companies and holders. According to an official document released by the Trump campaign team recently, the Republican Party's "Make America Great Again" platform vows to end the "illegal and un-American crackdown" on the US crypto industry, and promises to "defend the right to mine Bitcoin" and allow cryptocurrency holders to keep their tokens themselves, in addition to opposing the creation of a central bank digital currency (CBDC). "We will defend the right to trade without government surveillance and control," the document reads.
