The Federal Reserve decision to cut interest rates this week shows that the US economy is experiencing a choppy market situation. As history repeats itself, the crypto market will benefit as the economy unleashes fresh liquidity.
However, this rate reduction may not boost crypto as in the past. Experts say political and inflation uncertainty, coupled with investor attention, can ease the impact. Still, they believe that different sectors such as real-world assets (RWAS), decentralized finance (defi), and stubcoin are suitable to benefit.
It’s a rate cut, but there’s a catch
The Federal Reserve’s decision to cut interest rates is usually filled with support from risky asset investors. This is a signal that cheap money is coming. However, I feel that this time is different.
Bitcoin prices remained stable amid Powell’s decision to cut the rate by 25 bps, but its sustained momentum was largely due to institutional support, such as ETF inflows, and commitment from long-term participants.
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However, on-chain signal quickly revealed that not all participants shared the same optimism.
As Beincrypto recently reported, the decline in momentum at the new address suggests retail investors are pulling back. A small number of new entrants emphasize the fear of market saturation and falling.
This data represents the tensions that currently define the market. This reduces the rates that inject liquidity and confirm the weakening of the economy.
“The reason for yesterday’s rate cuts was “risk management” per powell, which is a good term. The FOMC believes it is balanced towards growth protection against inflation prevention, while acknowledging that both are positive risks.
This single Fed move forces crypto investors to navigate more complex panoramas than simple “buying DIP” stories.
Flowable catalyst
Federal Reserve rate cuts have introduced dynamics that appear to be opposed by economic conditions and market liquidity. The rate cut itself acknowledges a weaker economy, but also shows fresh liquidity that has historically served as a catalyst for the cryptocurrency market.
Analysts are closely observing this liquidity factor.
“To (cut) liquidity, low discount rates, and enforce risk assets on investors, this paradox is why stocks and crypto can gather even if the Fed is essentially confirming slower growth. For now, the market is focusing on liquidity impulses and soft landing outlooks rather than drugs from weak foundations.
This perspective coincides with historical records of past mitigation cycles, during which significant cryptographic gatherings continue.
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Bitcoin in particular has a history of front-running these events, and its prices have risen to expected rate reductions. After the news is confirmed, the “sell news” dip often follows as traders who buy rumors make a profit.
“In 2019, BTC rose from $4,000 to $13,000 in hopes of cuts, but it didn’t explode right after the announcement. With the March 2020 cuts, Bitcoin was one of the first products to rebound, ahead of gold,” added Stadelmann.
However, this week’s interest rate cuts took place under a very different situation than the previous easing cycle.
Inflation, tariffs, uncertainty
History offers an attractive roadmap for how liquidity fuels crypto-members, but the current environment is defined by key variables that can disrupt that pattern.
As Jamie Elkaleh, Chief Marketing Director at Bitget Wallet, points out, two important factors differ this time.
“First, political background: the Fed’s independence is under scrutiny, which can cause reliability issues. Second, history suggests interest rate cuts, as inflation mixes are not that easy and tariffs and supply chain risks complicate the picture, but today’s margin of error is narrowed.”
The political element adds a layer of uncertainty that is not seen in past cycles. Recent legal challenges for Fed governors have raised concerns about possible political interference in monetary policy. This risk can undermine market confidence in central banks.
Furthermore, unlike past cycles driven by strong demand, current geopolitical events, especially tariffs and supply chain risks, it further complicates inflationary pressures..
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“Labor market data is softening, tariffs are putting pressure on the outlook for inflation. The Fed is walking on a subtle line. Preventing slowing from becoming more serious is a mitigation policy, while acknowledging that inflation has not completely disappeared.
Despite political and macroeconomic headwinds, liquidity injections still need to find a home. Some sectors can benefit more than others.
Look at the winner
Bitcoin remains macro play, but the true “winners” of this mitigation cycle can be found in the clear crypto category that is most sensitive to fresh capital inflows.
For investors, three important categories are considered to be the most immediate and sensitive beneficiaries of liquidity injections of defi, memecoin and RWA.
Defi thrives as lower borrowing costs and “yield reach” drive investors from traditional financial products that are not attractive to the chain’s money market. On the other hand, the meme coin is often the first to see a surge in speculative activity.
As Markus Levin, co-founder of Xyo, told Beincrypto:
“Categories like Defi and Meme coins are historically most sensitive to fresh influx. Retail speculation and trading volume are the first to be rebounded.”
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The growth of RWAS is also a fascinating story of this cycle. The RWA market is expanding, with tokenized Ministry of Finance and private credit lending gaining institutional adoption. Hard data supports this growth. The total RWAS value locked (TVL) rose 31% over the quarter to $8.2 billion.
Decentralized physical infrastructure networks (Depins) also have important potential.
“Messari tracked over 400% growth in the industry in 2024. As of September 2025, Coinmarketcap’s Depin category page currently shows collective market capitalizations of over $37 billion.
Stubcoins, meanwhile, have grown significantly and serve as the basis for many of the chain economy.
A story about yield
As traditional financial products like government bonds become less attractive in low-cost environments, the yields offered by the Defi Stablecoin protocol become more attractive.
“Stubcoin is at the heart of this story. While lower policy rates compress yields with traditional cash products, the on-chain market still offers double-digit returns from double-digit returns through lending, structured products, or tokenized T-builds.
As money costs drop, demand shifts to where yields are at the highest.
“If rate cuts are expected by the end of the year, short-term finances may not be as attractive as on-chain products that package credit, staking or standard premieres, which can support stubbing deposits.
This new reality presents a key test of the crypto market. The true measure of this mitigation cycle is whether sectors in these early chains can fully utilize the fluidity impulses and demonstrate resilience in uncertain macro environments.
