Connect with us

Hi, what are you looking for?

Editor's Pick

Federal Reserve’s Rate Cut Could Spark Institutional Interest in DeFi and Stablecoins, Fidelity Predicts

The United States Federal Reserve’s potential interest rate cut could reignite major institutional interest in decentralized finance (DeFi) and stablecoins, according to asset manager Fidelity.

In their recently released 2024 Digital Assets Look Ahead report, Fidelity suggests that this resurgence is contingent on the further development of DeFi infrastructure throughout 2024.

Fidelity had previously anticipated institutional forays into DeFi due to its attractive yields in 2023, which did not materialize as expected.

Instead, institutional investors were driven towards traditional fixed-income products due to Federal Reserve rate hikes, which were perceived as a safer bet in a risk-averse environment.

DeFi Platforms Plagued by Complex User Interfaces and Vulnerabilities

DeFi platforms had long been plagued by complex user interfaces and susceptibility to hacks, causing institutions to carefully assess the risks associated with smart contracts.

In the risk-off environment, the mid-single digit returns offered by DeFi were deemed too modest compared to the perceived risks of experimenting with smart contracts.

Nonetheless, Fidelity believes that 2024 may see institutions rekindle their interest in DeFi yields if they become more attractive than traditional finance (TradFi) yields once again, coupled with the emergence of more advanced infrastructure.

Fidelity also anticipates that corporations will become more open to the idea of adding digital assets to their balance sheets.

The shift comes as updated rules from the United States Financial Accounting Standards Board allow companies to report both paper losses and gains from their crypto holdings.

Institution Interest in Stablecoins is Growing: Fidelity

In addition to DeFi, Fidelity’s report highlights the growing interest in stablecoins among institutional players.

The report suggests that the exploration of U.S. dollar-pegged stablecoins will be a significant catalyst for adoption in 2024.

Traditional finance companies exploring the use of stablecoins, particularly for settlement purposes, could lend legitimacy to these assets.

Fidelity predicts that payments, remittances, and international trade will be the three main sectors to witness increased stablecoin adoption as users seek faster and more cost-effective payment solutions.

Furthermore, the report expects that regulatory frameworks surrounding stablecoins will become clearer, providing greater certainty.

Fidelity remains bullish on stablecoins such as Tether ( USDT) and USD Coin ( USDC), suggesting they are unlikely to lose ground in 2024.

In fact, Fidelity suggests that this segment of the market will continue to gain traction throughout the year, potentially accelerating further if the Federal Reserve implements anticipated interest rate cuts.

In November last year, the 90-day net change in the supply of the top four stablecoins, Tether, USDC, Binance USD (BUSD), and Dai (DAI), turned positive, marking first such instance since the collapse of Terra in mid-May 2022.

“This week, the 90-day change in aggregated stablecoin supplies flipped positive for the first time in 1.5 years,” Reflexivity Research said at the time.

Stablecoins remain key to the day-to-day operations of the cryptocurrency industry, acting as a bridge between traditional finance and cryptocurrencies.

“Stablecoins have become the foundation of the cryptocurrency market,” William Quigley, one of the co-founders of Tether, told Cryptonews.

“Stablecoins are the core ingredient in virtually all DeFi applications. Without stablecoins, overall trading volume and liquidity in the crypto market would likely drop 75%.”

The post Federal Reserve’s Rate Cut Could Spark Institutional Interest in DeFi and Stablecoins, Fidelity Predicts appeared first on Cryptonews.

You May Also Like

Editor's Pick

As decentralized naming systems gain traction, Ethereum Name Service has seen ENS price double, leaving some FOMO investors asking is it too late to...

Economy

How can Forex crash? Forex market crash history Fact that the Forex is one of the most volatile and most profitable markets in the...

Editor's Pick

Colorado-based pastor Eligio “Eli” Regalado and his wife, Kaitlyn, are facing legal action after allegedly defrauding investors of millions of dollars through the sale...

Stock

Enthusiasm is needed to drive an uptrend, but sometimes enthusiasm can go too far. That is why technical analysts like to use various sentiment...

Disclaimer: happyretirementstories.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.


Copyright © 2024 happyretirementstories.com