Core Insights - The Federal Reserve's recent interest rate cut signals a potential easing of monetary policy, which is generally perceived as bullish for cryptocurrencies due to lower capital costs and increased liquidity [2][12] - However, the immediate market response has been more complex, with no significant surge in capital inflow into Bitcoin (BTC) and Ethereum (ETH) following the announcement [3][12] Group 1: Impact on DeFi Lending - The interest rate cut by the Federal Reserve creates two opposing forces in the DeFi lending market [5] - The first effect is a reverse effect where lower rates lead to higher on-chain yields as investors seek returns outside traditional assets, potentially increasing utilization and on-chain rates [5][7] - The second effect is a direct correlation where lower rates decrease the cost of alternative liquidity sources, leading to lower borrowing costs and a decrease in both on-chain and off-chain lending rates over the medium to long term [10][12] Group 2: Market Dynamics and Yield Trends - Aave's USDC lending rates on Ethereum show a narrowing of the borrowing-supply yield spread prior to the Fed's announcement, indicating increased competition for yield [7] - Pendle, a DeFi platform for forward yield markets, shows that implied yields are significantly higher than traditional rates, but are also declining in line with expectations of further Fed easing [10][12] - The overall trend indicates that as macro policies evolve, on-chain yields are expected to decrease, impacting liquidity conditions in the crypto market [12]