The Federal Reserve's rate cuts not only boost the crypto market and stocks but could also destabilize the stablecoin market.

Fed and Stablecoins

Stablecoins like Tether (USDT) and USD Coin (USDC) are heavily backed by U.S. Treasuries, holding over $120 billion. When the Fed cuts rates, stablecoin issuers see their income decrease, pushing them to seek alternative revenue streams, including potential fee implementation.

Companies Brace for Change

Stablecoin companies are preparing for potential changes, which could see increased demand for stablecoin technology amid expected economic activity growth. However, as rates decrease, there's an anticipated shift toward cryptocurrencies for diversification.

Ongoing Regulatory Pressure

U.S. regulators continue to clamp down on crypto companies, collecting over $19 billion in settlements this year, with significant contributions from firms like FTX and Terraform Labs.

The Fed's rate cuts could have mixed effects on the crypto and stablecoin markets, leading to increased investment activity as well as heightened regulatory scrutiny.