FTX’s $16 Billion Redistribution Can Lead to Huge Liquidity Influx in Crypto

• FTX is set to redistribute $16 billion to creditors in Q4 2024, which could significantly impact the crypto market by introducing a major liquidity influx.
• A 50 bps rate cut by the U.S. Federal Reserve and similar moves by other central banks have increased liquidity.

The bankruptcy estate of FTX will conduct a redistribution of $16 billion to creditors in the fourth quarter of 2024. This liquidity influx could have a major impact on the crypto market with huge liquidity flowing back into the market.

Historically, Q4 is a time when fund managers assess portfolios, allocate new money to various assets, and rotate existing positions. With the $16 billion redistribution from FTX, this process could lead to significant market movements. 

On the other hand, FTX has also attracted SEC scrutiny for its previous plans to redistribute creditors on crypto, per the CNF report. However, FTX redistribution and liquidity pump are not the only factors that can trigger a crypto market rally.

Many are anticipating a “markup” period, where asset prices rise due to new inflows and reallocations. In addition, after the Bitcoin Halving events, the fourth quarter has proven to be the most fruitful for BTC and other digital currencies.

Moreover, several macroeconomic tailwinds are also supporting the crypto market. First, the U.S. Federal Reserve recently cut interest rates by 50 basis points (bps), the first reduction since the COVID-19 pandemic in 2020.

In addition, Hong Kong’s Monetary Authority followed suit, reducing rates by 0.5% to 5.25%, while Japan kept its rates unchanged at 0.25%. The rate cut moves have made borrowing cheaper, driving liquidity into markets like crypto.

Beyond FTX Redistribution – Q4 Fed Rate Cut Prediction

Additionally, the upcoming U.S. presidential election may bring economic stimulus and further interest rate cuts. Bank of America (BofA) Global Research has revised its forecast, expecting the U.S. Federal Reserve to cut interest rates by 75 bps in Q4 2024. Lower borrowing costs typically push investors toward riskier assets such as Bitcoin and Ethereum.

Hence the fourth quarter could see a higher jump if the Federal Reserve cuts interest rates by 75 bps. The recent rate cuts have already had a noticeable impact on the crypto market. Bitcoin price is nearing the $64,000 mark, while Ethereum has jumped past $2,500. As reported by Crypto News Flash, Ethereum has struggled majorly in recent months, while the BTC market dominance has continued to grow. 

The expectation of more rate cuts in Q4 is fueling optimism among investors at the present time as well. The additional liquidity entering the market, combined with the lower cost of borrowing, is driving demand for cryptocurrencies.

In addition, MicroStrategy announced the acquisition of $458.2 million worth of BTC on Friday, adding more liquidity and buying pressure per the CNF report. The consistent institutional influx from MicroStrategy, MARA, and spot Bitcoin ETFs could set the stage for a Q4 rally.