US Rate Cuts Expected to Boost DeFi Yields, Bernstein Predicts

cryptonews.com:

Hassan, a Cryptonews.com journalist with 6+ years of experience in Web3 journalism, brings deep knowledge across Crypto, Web3 Gaming, NFTs, and Play-to-Earn sectors. His work has appeared in...

As U.S. Federal Reserve rate cuts loom, decentralized finance (DeFi) yields are positioned well for a resurgence, according to a recent report by analysts at research and brokerage firm Bernstein.

With the possibility of a 25- to 50-basis-point cut anticipated on Wednesday, analysts Gautam Chhugani, Mahika Sapra, and Sanskar Chindalia forecast a promising outlook for DeFi, particularly on Ethereum.

The analysts wrote in a note:

“DeFi yields look attractive again with a rate cut likely around the corner. This could be the catalyst to reboot crypto credit markets and revive interest in DeFi and Ethereum.”

DeFi platforms allow global participants to earn a yield on stablecoins like USDC and USDT by providing liquidity in decentralized lending markets.

While the explosive growth of the 2020 “DeFi summer” has faded, and the high yields incentivized by app tokens are long gone, stablecoin lending on Aave, the largest lending market on Ethereum, continues to offer competitive rates of around 3.7% to 3.9%.

According to Bernstein’s analysis, the total value locked (TVL) in DeFi protocols, although still only half of its 2021 peak, has surged from the lows of 2022, doubling to approximately $77 billion.

The number of monthly active DeFi users has increased three to four times since the market’s lowest point.

Stablecoins have also seen a resurgence, with total issuance returning to around $178 billion. Active wallet numbers have stabilized, hovering at about 30 million monthly users.

“These are all signs of a recovering crypto DeFi market that