The Federal Reserve’s decision to cut interest rates this week indicates that the American economy is experiencing choppy market conditions. If history repeats itself, the crypto market will benefit as the economy unlocks fresh liquidity.
However, rate cuts this time may not boost crypto as they have in the past. According to experts, political and inflationary uncertainty, coupled with investor caution, could temper the impact. Still, they believe distinct sectors like Real-World Assets (RWAs), decentralized finance (DeFi), and stablecoins are well-positioned to benefit.
A Rate Cut, But with a Catch
The Federal Reserve’s decision to cut interest rates is typically met with a cheer from risk asset investors, a signal that cheaper money is coming. But this time feels different.
Though Bitcoin’s price remained steady amid Powell’s decision to cut rates by 25 bps, its sustained momentum was largely due to institutional support, like ETF inflows, and commitment from long-term participants.
However, on-chain signals soon revealed that not every participant shared the same optimism.
As BeInCrypto recently reported, a decline in New Address Momentum suggests retail investors are pulling back. Fewer new entrants highlight fears of market saturation or a coming downturn.
The data represents a tension now defining the market—a rate cut injecting liquidity and confirming a weakening economy.
“The reason for yesterday’s rate cut was ‘risk management’ per Powell, and it’s an appropriate term. The FOMC sees their objective balance tilting towards growth protection from inflation prevention, even while acknowledging that both are active risks. In other words, the specter of stagflation is spooking us again, and it’s not even Halloween,” Max Gokham, Deputy Chief Investment Officer at Franklin Templeton, explained.
This single Fed move forces crypto investors to navigate a panorama more complex than a simple “buy the dip” narrative.
The Liquidity Catalyst
The Federal Reserve’s rate cut has introduced a dynamic in which economic conditions and market liquidity appear to be in opposition. While the rate cut itself acknowledges a weakening economy, it also signals fresh liquidity that has historically served as a catalyst for cryptocurrency markets.
Analysts are observing this liquidity factor closely.
“[Cuts] inject liquidity, lower discount rates, and force investors back into risk assets. This paradox is why equities and crypto can rally even when the Fed is essentially confirming slower growth. For now, markets are focused more on the liquidity impulse and the prospect of a soft landing than the drag from weaker fundamentals,” Komodo Platform Chief Technology Officer Kadan Stadelmann told BeInCrypto.
This perspective aligns with the historical record of past easing cycles, during which significant crypto rallies have followed.
Bitcoin, in particular, has a history of front-running these events, with its price increasing in the run-up to an anticipated rate cut. It’s often followed by a “sell the news” dip, as traders who bought on the rumor take profits once the news is confirmed.
“In 2019, BTC rose from $4,000 to $13,000 in anticipation of cuts but didn’t explode right after the announcements. In the wake of the 2020 March cuts, as lockdowns gripped the world, Bitcoin crashed before being one of the first commodities to rebound—even ahead of gold,” Stadelmann added.
However, this week’s rate cuts were made under circumstances that differ significantly from previous easing cycles.
Inflation, Tariffs, and Uncertainty
While history offers a compelling roadmap for how liquidity can fuel a crypto rally, the current environment is defined by significant variables that could disrupt that pattern.
As Bitget Wallet Chief Marketing Officer Jamie Elkaleh points out, this time, two key factors are different:
“First, the political backdrop: Fed independence is under scrutiny, and that can create credibility issues. Second, the inflation mix is less straightforward, with tariffs and supply chain risks complicating the picture. So while history suggests rate cuts should lift markets, the margin for error is narrower today.”
The political element adds a layer of uncertainty not seen in past cycles. The recent legal challenge against a Fed governor has raised concerns about the potential for political interference in monetary policy. This risk could undermine the market’s trust in the central bank.
Furthermore, unlike past cycles driven by strong demand, current geopolitical events, particularly tariffs and supply chain risks, further complicate inflationary pressures.
“Labor market data has softened, and tariffs have added pressure to the inflation outlook. The Fed is walking a fine line: it’s easing policy to prevent the slowdown from becoming something more severe, while still acknowledging that inflation hasn’t fully disappeared… the cut is less a ‘green light’ for growth, and more a recognition that the economy needs support,” Elkaleh added.
Despite the political and macroeconomic headwinds, the liquidity injection still needs to find a home. Some sectors may stand to benefit more than others.
A Look at the Winners
While Bitcoin remains a macro play, this easing cycle’s true “winners” may be found in distinct crypto categories most sensitive to a fresh influx of capital.
For investors, three key categories are poised to be the most immediate and sensitive beneficiaries of a liquidity injection: DeFi, meme coins, and RWAs.
DeFi thrives as lower borrowing costs and a “reach for yield” push investors away from less-attractive traditional finance products and into on-chain money markets. Meanwhile, meme coins are often the first to see a surge in speculative activity.
As XYO Co-founder Markus Levin told BeInCrypto:
“Categories like DeFi and meme coins are historically the most sensitive to fresh inflows, as retail speculation and trading volumes rebound first.”
The growth of RWAs is also a compelling narrative for this cycle. The RWA market is expanding, with tokenized Treasuries and private credit lending gaining institutional adoption. Hard data backs this growth: total value locked (TVL) in RWAs is up 31% quarter over quarter to $8.2 billion.
Decentralized Physical Infrastructure Networks (DePINs) also hold important potential.
“Messari tracked over 400% growth for the industry in 2024. As of September 2025, CoinMarketCap’s category page for DePIN shows a collective market cap currently over $37 billion. The World Economic Forum projects it could scale into the trillions by 2028, reshaping computing through a more distributed infrastructure,” Levin added.
Meanwhile, stablecoins will grow significantly, serving as the foundation for much of the on-chain economy.
The Yield-Seeking Narrative
As traditional finance products like government bonds become less attractive in a low-rate environment, the yields offered by DeFi stablecoin protocols become more appealing.
“Stablecoins sit at the center of this story. Lower policy rates compress yields in traditional cash products, while on-chain markets still offer mid-single to double-digit returns through lending, structured products, or tokenized T-bills. That relative spread makes stablecoins even more attractive as both a store of liquidity and a spendable currency,” Elkaleh explained.
As the cost of money goes down, demand shifts to where the yield is greatest.
“With rate cuts expected through year-end, short-duration Treasuries may become less attractive relative to on-chain products that package credit, staking, or basis premia. This can support stablecoin deposits. Thus we expect a shift toward tokenized cash equivalents and yield-bearing stables, alongside tighter integrations with exchanges as issuers chase scale,” Gokham added.
This new reality presents a critical test for the crypto market. The true measure of this easing cycle will be whether these nascent, on-chain sectors can fully capitalize on the liquidity impulse and prove their resilience in an uncertain macro environment.
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