The Federal Reserve announced a rate cut of 25 basis points to 4%-4.25%, signaling the possibility of two more cuts this year. Mizuho Securities analyzes that exchanges and consumer financial platforms, including Coinbase and Robinhood, will be the biggest winners, while stablecoin issuer Circle will face pressure.

Mizuho Securities names the biggest beneficiaries: exchanges and financial platforms

With the Federal Reserve (Fed) announcing a 25 basis point rate cut a few days ago, optimistic prospects for market funds shifting towards risk assets are expected to drive financial technology startups and the cryptocurrency market to new heights.

Mizuho Securities analysis team points out through 20 years of data backtesting that in a rate-cutting environment, the biggest beneficiaries will be 'cryptocurrency exchanges and online brokerages.' Among them, Coinbase (COIN), Robinhood (HOOD), and eToro (ETOR) are specifically mentioned:

These companies heavily rely on trading fees (estimated to account for 50% to 70%), and historically, when interest rates are low, fee income tends to grow with increased trading activity.

Additionally, banks and consumer lending institutions also benefit. Analyst Dan Dolev explains that low interest rates help drive the growth of trading account funds, thereby boosting overall financial activity and creating a virtuous cycle.

(Mizuho Securities analyst gives Robinhood stock an outperform rating: $120 target price unchanged)

Concerns about the income of stablecoins: Circle is at the forefront

Unlike the bullish outlook for exchanges, stablecoin issuer Circle (CRCL) evidently faces challenges. Dolev points out that Circle's revenue structure heavily relies on the returns from assets such as U.S. Treasury bonds, and rate cuts signify that the yields on these assets will decline, directly compressing the company's profits.

Although Circle performed well initially after its listing, Mizuho Securities has held a bearish attitude toward the company since its IPO, currently giving it an 'underperform' rating with a target price of $84. If Circle cannot effectively expand its scale, its situation may only become more difficult.

(Is issuing stablecoins really that profitable? From Tether to Aave GHO, the profit truth for later participants)

DeFi opportunities emerge: high-yield protocols attract capital

The decline in traditional yields also brings another layer of effect. RedStone co-founder Kazmierczak points out that when traditional market interest rates decline, exchanges or DeFi protocols offering 5% to 10% annualized returns become more attractive.

This could drive the total locked value (TVL) of lending platforms to grow while increasing market demand for stablecoins, as users always seek to maximize returns.

(Coinbase offers a 4.5% interest rate to capture the market, but is the yield-generating stablecoin really risk-free?)

Stock prices and ratings: the market's initial response is optimistic

From the stock market perspective, since the announcement of interest rate cuts, Robinhood and eToro's stock prices have risen by 2.8% and 3% respectively, Coinbase soared by 8.1%, and Circle's stock price increased by 7.7%. This highlights that cryptocurrency-related stocks are still more popular in short-term trading.

In Mizuho Securities' latest ratings, Robinhood and eToro are maintained at 'outperform', while Coinbase receives a 'neutral' rating.

The Federal Reserve's rate cuts not only affect traditional markets but will undoubtedly trigger structural changes in the cryptocurrency and fintech sectors. Among them, exchanges and consumer finance platforms will become the biggest winners, while stablecoin issuers will bear the pressure.

This article Mizuho Securities sees rate cuts as favorable: Coinbase and Robinhood are the biggest beneficiaries, while Circle faces headwinds first appeared in Chain News ABMedia.