After enduring the "five poor and six absolute," these several favorable factors will promote a reversal in the cryptocurrency market

Author: Nancy, PANews

After enduring the "five poor and six absolute" phase, the cryptocurrency market in July did not welcome the anticipated rebound. On the contrary, the German government's sell-off and negative events such as the Mt. Gox repayments have heightened investor panic, leading to a significant decline in the entire cryptocurrency market as Bitcoin dipped.

As investor confidence faced a severe blow, the $16 billion FTX repayment plan, rising expectations of interest rate cuts, and the results of the U.S. elections are seen as multiple positive factors that may lead to a turnaround in the cryptocurrency market starting from the fourth quarter of 2024.

$16 Billion FTX Repayment Plan May Drive Market to New Highs

According to the revised restructuring plan and disclosure statement submitted by FTX to the U.S. Bankruptcy Court in Delaware this May, it is expected that the total value of assets collected, converted to cash, and available for distribution will be between $14.5 billion and $16.3 billion, exceeding the $11 billion owed to FTX's 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 debtors expect that 98% of FTX's creditors will receive approximately 118% of their allowed claim amounts within 60 days after the plan takes effect. However, due to differing opinions among FTX creditors, there has not yet been a consensus on the compensation method.

Currently, FTX has received court approval for creditors to vote on initiating a compensation plan either in cash or in kind with cryptocurrency. According to court documents, creditors must vote by August 16, and Judge Dorsey will decide whether to approve the plan on October 7. Once the court approves the restructuring plan, FTX will repay creditors within two months. Based on the timeline, the expected repayment period for FTX is around the fourth quarter of 2024 to the first quarter of 2025.

Although the final compensation method has yet to be determined, crypto analyst Ash Crypto believes that, given that most FTX customers are cryptocurrency enthusiasts, the massive $16 billion influx will enter the cryptocurrency market and become the biggest catalyst for price increases, with Bitcoin expected to break $120,000, Ethereum to surpass $12,000, and other altcoins to rise by more than 10 to 50 times.

Interest Rate Cut Expectations Rise, September Cut Probability Exceeds 70%

The Federal Reserve's interest rate hikes and cuts are one of the important factors affecting Bitcoin prices, as rate cuts often lead to a stronger market.

Recently, Federal Reserve Chairman Jerome Powell stated that inflationary pressures in the U.S. have eased recently, but the Fed needs more data to prove that inflation risks have passed before deciding to cut rates. If rates are cut too early, inflation may rise again; if cut too late, it could lead to slower economic growth and trigger a recession.

Although Powell indicated that the timing for a rate cut is still uncertain, market expectations for a rate cut have increased following the latest U.S. economic data, which shows signs of slowing growth. For example, the June non-farm payroll data was significantly revised downward, and the unemployment rate climbed to 4.1%, the highest level since November 2021.

For instance, analysts at Citigroup expect the Fed to start cutting rates by 25 basis points at each meeting beginning in September, totaling eight 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 maintain it at that level for the remainder of 2025. QCP Capital also stated in its latest market analysis that U.S. employment data showed downward revisions for April and May, confirming Powell's deflationary path and the possibility of an earlier rate cut, with increased probabilities for cuts in September and December. Additionally, in the latest Fed meeting, 7 out of 19 officials expected the Fed to cut rates once this year, while 8 supported two cuts.

According to the CME Group's FedWatch Tool, as of July 9, the market's expectation for a rate cut at the Fed's September meeting has risen to 73.6%, with the probability of no change at 22.9%.

First U.S. Cryptocurrency Accounting Standards to Take Effect in 2025

In December last year, the Financial Accounting Standards Board (FASB) in the U.S. released the first version of accounting rules for cryptocurrencies, stating that companies holding Bitcoin or Ethereum must record their values at fair value, with changes reflected in net income. The new rules will take effect for fiscal years beginning after December 15, 2024, applicable to both public and private companies in 2025.

For crypto assets, the change in accounting standards means that companies like MicroStrategy, Tesla, and Block will be able to record the peak and trough 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, meaning the latest market value, with changes in fair value directly impacting net income.

In response, MicroStrategy founder Michael Saylor stated that this move will promote the adoption of Bitcoin as a treasury reserve asset by global enterprises; former PayPal president David Marcus also believes that the new regulations will eliminate a significant barrier for companies to include Bitcoin on their balance sheets, marking an important milestone for Bitcoin.

Trump's Winning Probability Rises, Cryptocurrency Becomes New Election Chip

2024 is an election year, with the U.S. presidential election being the most closely watched globally, set to take place on November 5. In this election, cryptocurrency has become an important topic, with Trump showing a positive attitude towards it, even stating he wants to be the "crypto president." The Biden administration has also followed suit with friendly signals, and the shift in U.S. political winds has positively impacted the development of the cryptocurrency market.

Currently, the "Biden withdrawal theory" continues to gain traction, with several Democratic members of the U.S. House of Representatives calling for Biden to withdraw from the presidential race, and Senator Warner leading efforts to push Biden out of the campaign. Although Biden has publicly rejected the idea of withdrawing, Trump's winning probability has significantly increased after the first televised debate, and in the second quarter 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 cryptocurrency market. Standard Chartered Bank stated that August 4 is a key date for Biden to make a decision; if he withdraws from the race, it could lead to more favorable policies for the cryptocurrency market, potentially pushing Bitcoin to new highs, with predictions of reaching $200,000 by 2025.

Additionally, the Republican National Committee stated in its official platform for the 2024 U.S. election that it will support several policies beneficial to cryptocurrency companies and holders. Trump's campaign team recently released an official document stating that the Republican "Make America Great Again" agenda vows to end the "illegal and un-American crackdown" on the U.S. cryptocurrency industry, promising to "defend Bitcoin mining rights" and allow cryptocurrency holders to store their tokens independently, while also opposing the creation of a Central Bank Digital Currency (CBDC). The document states, "We will defend the right to transact without government surveillance and control."