Markets Outlook Fed Rate Cuts Will Trigger The Next DeFi Summer
Sep 29, 2025
Sanat Rao discusses the impact of recent Fed rate cuts on crypto markets and sets the stage for a potential new DeFi summer. He highlights how lower interest rates enhance DeFi yields and encourages risk-on behavior. The conversation also touches on Traditional Finance's increasing engagement with on-chain finance, suggesting a convergence of the two sectors. Rao compares today's landscape to the past, noting a more institutionalized DeFi environment while addressing the evolving risks facing investors, such as stablecoin stability.
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Fed Cuts Make DeFi Yields More Valuable
- Fed rate cuts lower the public risk-free rate and make DeFi yields comparatively more attractive.
- Lower rates also drive risk-on behavior, increasing capital and leverage into DeFi that pushes yields higher.
TradFi Moving On Chain
- Traditional finance is beginning to adopt on-chain finance and tokenized real-world assets.
- Sanat Rao expects stronger TradFi–DeFi convergence over the next few years with institutional players entering on-chain markets.
From 2020 Wild West To Institutional DeFi
- Sanat Rao recounts entering DeFi during the 2020 DeFi summer and contrasts that wild period with today.
- He describes higher TVL, lower fees on L2s, more protocols, and improved institutional infrastructure.