According to Cointelegraph: Fidelity Investments, a major global asset manager, suggests in its 2024 Digital Assets Look Ahead report that upcoming interest rate cuts by the US Federal Reserve could stimulate institutional interest in decentralized finance (DeFi) and stablecoins, provided the infrastructure continues to develop.
Fidelity predicted this institutional move towards DeFi in 2023, but points out that instead, institutions gravitated toward traditional fixed-income products due to Fed rate hikes. These traditional financial instruments are viewed as safer, especially considering the perceived complexities and vulnerability to hacks associated with DeFi platforms.
However, with potential Fed rate reductions in 2024, Fidelity anticipates a renewed interest in DeFi, as its yields could become more appealing than those of traditional financial (TradFi) yields, coupled with advancements in DeFi infrastructure.
Fidelity also anticipates that more corporations might consider adding digital assets to their balance sheets. This follows the revised regulations by the US Financial Accounting Standards Board allowing companies to report on gains and losses from cryptocurrency holdings.
In terms of stablecoins, Fidelity perceives institutional curiosity and subsequent adoption as the "greatest potential catalyst." It notes that as traditional finance firms explore stablecoin use for settlements and payments, it could enhance stablecoins' legitimacy. Fidelity predicts heightened adoption in sectors such as payments, remittances, and international trade, as users seek swifter, cost-effective payment methods.
With expected clarity in regulatory frameworks, Fidelity asserts that Tether (USDT) and USD Coin (USDC) would maintain their market positions in 2024. The asset manager concludes, "It is expected that this area of the market continues to gain traction throughout 2024," concluding, "Potentially more so if anticipated Federal Reserve interest rate cuts occur.”