Crypto enthusiasts are excited, sparked by a recent X post from Lark Davis, a profound Bitcoin investor and founder of Wealth Mastery. In his post, Davis predicted that ‘the next three months are going to be absolutely insane for crypto,’ pointing to key events like potential Fed rate cuts, the possibility of a pro-crypto president, rumors about China lifting its crypto ban, and more. He emphasized that the market may not be bullish enough given the massive changes ahead. In this article, we’ll dive into the reasons why crypto is poised for an insane ride.
Federal Rate Cuts
During the Fed’s annual conference in Wyoming, Jerome Powell, the Federal Reserve Chair, hinted at the imminent policy shift. The Federal Reserve, which had kept the interest rate at 5.25 to 5.50% from the July 2023 meeting, said that the direction of travel is clear and that the timing and pace of rate cuts will depend on incoming data.
The Federal Open Market Committee (FOMC) usually holds eight meetings a year, during which it decides whether to cut tax rates. The last meeting was held on July 30-31, 2024, and the members agreed to keep the tax rate the same. However, with Jerome Powell’s announcement during the meeting, there is a large possibility of Fed rate cuts in the next meeting, which is scheduled for September 17-18. The most optimistic view is that FOMC will cut the rates by 0.25 or 0.50. Furthermore, other than the one planned for September, there are still two meetings before the end of the year with the possibility of following the trend.
As Fed rate cuts affect the entire US economy, any increase or decrease would drastically change various sectors, such as finance, industry, and more. This is especially true for cryptocurrencies, which are most affected by interest rates. After the coming FOMC meeting, the trend of cryptocurrencies could go either bullish or bearish.
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US Election
The US election this time around is entirely different from the usual ones. In the last election, which occurred in 2020, the presidential candidates did not mention crypto. However, this election is entirely the opposite, with former president Donald Trump, who is running for president, taking the lead by clearly stating his support for cryptocurrencies. Furthermore, his campaign has also been accepting donations in crypto, which is evident on his campaign website, where it states that individuals can donate crypto. During his latest speech, he said,
We will make America the world capital of crypto and Bitcoin
On the other hand, Vice President Kamala Harris, who’s also running for president, hasn’t expressed her opinions on crypto. However, her senior advisor for policy, Brian Nelson, at the Democratic National Convention said that she’d back policies promoting the growth of emerging technologies and related sectors. Additionally, Future Forward PAC (Political Action Committee), a significant supporter of Harris, has started accepting crypto donations through Coinbase Commerce.
During this election, cryptocurrency has become a significant turning point, where crypto holders’ votes could potentially decide the difference between winning and losing the election. Regardless of whether the self-proclaimed crypto president Trump or Harris takes the office, it is certain that the crypto market will see a significant transformation.
CZ Becomes a Free Man
Binance Founder Changpeng Zhao, who has been serving his four-month prison sentence since June, was moved to a halfway house prior to his release. According to the Federal Bureau of Prisons (BOP), CZ, who was in Lompoc, a Federal Correctional Institution in California, was transferred to the Residential Reentry Management (RRM) Long Beach field office on August 22.
The field offices, often referred to as halfway houses, are administrative facilities where inmates nearing the end of their sentences will be sent. The prisoners will be assisted so that they can smoothly transfer into society. CZ will spend the rest of his sentence in the facility until his release on September 29.
According to an Axios report on September 5, Binance CEO Richard Teng stated that Changpeng Zhao had been banned from managing or operating the exchange for a lifetime. Furthermore, he also needs to face another money laundering lawsuit that was filed in August, accusing him and Binance of laundering money that caused financial difficulties for US consumers. CZ has always been a big player in the crypto industry, and once he is out of jail, he may make some moves that could have an impact on the entire market.
FTX Redistribution
The bankrupt crypto exchange FTX proposed a new reorganization plan to the Delaware bankruptcy court on May 7, 2024. According to the plan, FTX would pay its creditors and customers between $14.5 billion and $16.3 billion. The approximate value was calculated based on monetizing assets, most belonging to Alameda Research, litigation claims, and FTX venture businesses.
According to the plan, 98% of creditors with claims of $50,000 or less will be eligible for repayment and can receive 118% of the claims in cash. Furthermore, non-governmental creditors would also get back 100% of their claims along with a 9% interest from the date of bankruptcy. They could receive the repayment within 60 days of the court’s approval of the plan.
However, some creditors objected to this plan because it was based on asset values from November 2022, rather than current prices, and required cash repayment, which would trigger tax liabilities.. In response to these comments, FTX got approval from the court in June to ask the creditors to vote on whether they want to receive their funds in cash or in crypto.
On August 30, the SEC warned FTX that it could challenge payments made to creditors if it chose to return funds using stablecoins. In its filing to the Bankruptcy Court in Delaware, the SEC said that although creditor repayments made with stablecoins may not be illegal, it reserves the right to challenge crypto-asset transactions. The redistribution of funds in cash or coins is likely to happen in the coming months. If this happens, a major change in crypto is possible.
China’s Crypto Ban May be Lifted
Justin Sun, founder of TRON, posted a tweet on X on August 18: “China unbans crypto. What’s the best meme for this?” This rumor sparked many conversations about China’s stance on cryptocurrencies and the possibility of lifting the crypto ban. However, there was no response from the officials or even a piece of reliable evidence to back the statement.
But this wasn’t the first time a similar rumor had started; on July 14, Mike Novogratz, the CEO of Galaxy Digital, tweeted on X that China could unban Bitcoin by late 2024. The Chinese government first banned crypto exchanges in 2017 and later banned Bitcoin mining in 2021. If there is even a little bit of truth behind these statements, we could witness another massive bull run similar to the one in 2021 by late 2024.
Pro-Crypto Russia
Due to the sanctions by the Western countries since its war with Ukraine, Russia has been under immense financial pressure. In order to overcome these sanctions, Russia has turned towards cryptocurrencies. In late July, the state passed two bills legalizing the mining of cryptocurrencies from November 1 and allowing cross-border payments using crypto. Furthermore, on August 8, President Vladimir Putin signed these two bills into law.
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Although the law doesn’t lift the existing ban on using crypto for regular payments within the country, it allows select businesses and individuals approved by the Central Bank of Russian Federation (CBR) to use cryptocurrencies for international trade. On September 1, Russia launched regulated trials for using crypto in cross-border payments and utilized its National Payment Card System (NPCS) to exchange rubles into cryptocurrencies. If the pilot is a success, Russia will likely use crypto on a larger scale to facilitate cross-border payments, which will increase the price of cryptocurrencies.
Conclusion
The cryptocurrency world is experiencing a dynamic period marked by significant developments in politics, finance, and global regulations. From the potential for rate cuts by the Federal Reserve, which could shift the market, to the increasingly crypto-centric U.S. presidential election, digital assets are at the forefront of discussions. The global landscape is also changing, with China rumored to reconsider its crypto ban and Russia embracing crypto for cross-border trade to combat sanctions. As these factors converge, it is clear that cryptocurrency’s role in the global economy and political landscape will only continue to grow, making the next few months critical for the future of digital currencies.
