Is the cryptocurrency market turning a corner?
After surviving the "five poverty and six extremes", the crypto market did not usher in a turnaround in July as expected. On the contrary, negative events such as the German government's sell-off and the repayment of Mt. Gox are causing investors to panic, and Bitcoin has plummeted. It drove the encryption market to plummet across the board.
At a time when investor confidence has been hit hard, with the combination of multiple positive factors such as the US$16 billion FTX repayment plan, rising expectations for interest rate cuts, and the results of the US election, the crypto market is believed to be turning around starting in the fourth quarter of 2024.
$16 billion FTX repayment plan could push market to new highs
According to FTX’s revised reorganization plan and disclosure statement submitted to the U.S. Bankruptcy Court of Delaware in May this year, it expects that the total value of the assets it has collected, converted into cash and available for distribution will be between US$14.5 billion and US$16.3 billion. Over the $11 billion FTX owes customers and other non-governmental 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 debtors expect that 98% of FTX's creditors will receive approximately 118% of the amount of their allowed claims within 60 days of the plan's effectiveness. However, due to different opinions among FTX creditors, there is currently no consensus on the compensation method.
Currently, FTX has received court approval for creditors to vote on launching a compensation plan for cryptocurrency payments in cash or in kind. Creditors have until August 16 to vote, and Judge Dorsey will decide whether to approve the plan on October 7, according to court documents. Once the court approves the reorganization plan, FTX will repay creditors within two months. According to the timetable, FTX’s repayment time is expected to be approximately from the fourth quarter of 2024 to 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, a huge amount of $16 billion will enter the crypto market and become the biggest catalyst for price increases, with Bitcoin expected to exceed 12 Ten thousand US dollars, Ethereum will exceed 12,000 US dollars, and other altcoins will rise more than 10 times to 50 times.
Expectations for an interest rate cut within the year have increased, 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 tend to drive market strength.
Not long ago, Federal Reserve Chairman Powell said that inflationary pressure in the United States has eased recently, but the Federal Reserve still needs more data to prove that inflation risks have passed before deciding to cut interest rates. If interest rates are cut too early, inflation could rise again; if interest rates are cut too late, it could slow economic growth and trigger a recession.
Although Powell said that the timing of interest rate cuts has not yet been determined, the latest data released by the United States shows that the U.S. economic growth is slowing down. For example, the U.S. non-farm employment data in June was significantly downwardly revised, and the unemployment rate climbed to 4.1%, the highest level in 2021. The highest level since November, market expectations for interest rate cuts have also increased.
For example, analysts at Citi Research predict that the Federal Reserve will cut interest rates by 25 basis points at each meeting starting in September, with a total of eight interest rate 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 remainder of 2025; QCP Capital also said in its latest market analysis that the United States Employment data showed downward revisions to both April and May, confirming Powell's deflationary path and the possibility of an early interest rate cut, with the chances of rate cuts increasing in September and December. In addition, at the latest Federal Reserve interest rate meeting, 7 out of 19 officials expected the Fed to cut interest rates once this year, and 8 supported two interest rate cuts.
According to the CME Group's FedWatch Tool, as of July 9, the market expects that the probability that the Federal Reserve will cut interest rates at its September interest rate meeting has increased to 73.6%, and the probability of no action is 22.9%.
The first version of the U.S. crypto accounting system will take effect in 2025
In December last year, the U.S. Financial Accounting Standards Board (FASB) announced the first version of cryptocurrency accounting rules. Companies holding Bitcoin or Ethereum must record their currency value at fair value, and changes will be reflected in net income. The new regulations will take effect in the fiscal year starting after December 15, 2024, and apply to listed and unlisted companies in 2025.
For crypto-assets, changes in accounting standards mean companies including MicroStrategy, Tesla and Blockchain will be able to record highs and lows in the value of their cryptocurrency holdings. Under the new rules, companies that hold cryptocurrencies such as Bitcoin or Ethereum will need to record those tokens at fair value, which is the latest market value, and changes in fair value will be included directly in net income.
In response, MicroStrategy founder Michael Saylor issued an article stating 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 the need for companies to include Bitcoin on their balance sheets. A major obstacle that became an important milestone for Bitcoin.
Trump’s chances of winning the election increase, and cryptocurrency becomes a new bargaining chip in the election
2024 is an election year, and the competition in the United States has attracted the most attention from the world. The U.S. presidential election will also be held on November 5. In this election, cryptocurrency has become an important issue. Not only has Trump shown a positive attitude toward cryptocurrency, and even stated that he would become a "crypto president," the Biden administration has also followed suit by sending friendly signals. The direction of American politics has changed. The shift has had a positive impact on the development of the crypto market.
Currently, Biden's "retirement theory" continues to ferment, including several Democratic members of the U.S. House of Representatives calling on Biden to withdraw from the presidential election. Senator Warner is also taking the lead in pushing Biden to withdraw from the race. Although Biden publicly refused to withdraw from the race, Trump's victory rate improved significantly after the first TV debate in the United States. In the second quarter of fundraising, Trump raised $331 million, surpassing the $264 million raised by Biden and the Democratic National Committee. .
Trump’s victory is believed to bring new upward momentum to the crypto market. Standard Chartered Bank stated that August 4 is a key date for Biden to make a decision. If he withdraws from the campaign, he will bring policies that are more beneficial to the cryptocurrency market, or push Bitcoin to a new high, and predicts that it will reach $200,000 in 2025. .
In addition, the U.S. Republican National Committee stated in its official platform for the 2024 U.S. election that it will support a number of policy measures that will benefit encryption companies and holders. An official document released by the Trump campaign team in recent days stated that the Republican Party's "Make America Great Again" platform vows to end the "illegal and un-American crackdown" on the U.S. encryption industry, and promises to "defend Bitcoin mining rights" and allow encryption Currency holders take custody of their tokens, and there is also opposition to the creation of a central bank digital currency (CBDC). "We will defend the right to trade free from government surveillance and control," the document reads.
This article is reproduced in cooperation with: PANews
