Fed rate cuts could trigger cash flood into yield-bearing stablecoins

Core Insights - The crypto market is closely monitoring the Federal Reserve's potential interest rate cut, which is expected to be 25 basis points, as it will significantly impact cash flow into the industry [1][3]. Group 1: Federal Reserve's Impact - A rate cut by the Federal Reserve could unlock trillions of dollars in money market liquidity and mortgages, which is crucial for long-term market health [2]. - Currently, about 80% of U.S. mortgages are locked in at rates below 5%, limiting homeowners' interest in refinancing, but a rate cut could stimulate credit circulation [3]. - If the Fed resumes its rate-cutting strategy, it may lead to increased liquidity flowing into alternative yield-generating investments, including decentralized finance (DeFi) products and real-world asset (RWA) tokens [4]. Group 2: Stablecoins and Yield Generation - A potential rate cut could enhance cash flow into yield-bearing stablecoins, which are becoming more integrated into the global financial system [5][6]. - Yield-bearing stablecoins differ from traditional USD-pegged stablecoins as they generate yields through backing by real-world assets or lending protocols [6]. - The market capitalization of yield-bearing stablecoins was reported at $13.7 billion, indicating a growing interest in these financial instruments [7].