Fidelity: Fed rate cuts could be good for DeFi and stablecoins

Author: Jesse Coghlan, Cointelegraph; Compiler: Songxue, Golden Finance

Asset management company Fidelity said that the expected interest rate cut by the Federal Reserve may reignite major institutions’ interest in decentralized finance (DeFi ) and interest in stablecoins – as long as the infrastructure develops further this year.

Fidelity stated in the 2024 Digital Asset Outlook Report released on January 13 that although last year some institutions believed that institutional investors would get involved in DeFi for gains, this did not ultimately happen. happened because the Fed's rate hikes pushed them into "perceived safer territory" and became "traditional fixed income products."

Previously, DeFi platforms were seen as having difficult-to-use interfaces and being vulnerable to hacking and exploitation, leading institutions to "carefully scrutinize the risks associated with smart contracts."

“In the current risk-off environment, institutions believe that the mid-single-digit returns offered by DeFi yields are too low for the risks associated with experimenting with smart contracts.”

However , it stated that institutions may have a "renewed interest" in DeFi yields by 2024 if DeFi yields "again become more attractive than TradFi yields and a more developed infrastructure emerges."

Fidelity also expectscompanies may “ More open to the idea of ​​including digital assets on the balance sheet.”

Institutions exploring stablecoins

In the section on stablecoins, Fidelity predicts that institutions’ exploration of U.S. dollar-pegged assets will be the “biggest potential catalyst” for stablecoin adoption this year.

TradFi companies exploring the use of stablecoins for purposes such as settlements could “bring legitimacy” to them, the report said, predicting that “payments, remittances and international trade” will Becoming the three main areas where stablecoin adoption is increasing as users seek faster and cheaper payments.

“The regulatory framework is likely to become clearer, providing more certainty,” the report added.

“This market segment is expected to continue to gain traction in 2024,” Fidelity wrote. “If the Fed’s expected rate cut happens, it will be more beneficial for crypto.”