What is the impact of the Fed's interest rate cut on on-chain lending?

Original author: Ethan Chan & Hannah Zhang

Original compilation: Shenchao TechFlow

The

Federal Reserve cut interest rates this week and hinted at further easing in the future. The headlines of almost all mainstream crypto news are sending the same message:

lower cost of capital → increased liquidity → crypto bullishness.

But the reality is more complicated. The market has already priced in expectations of interest rate cuts, and there has been no immediate surge in the inflow of funds into BTC and ETH.

Therefore, let's not stop at the surface level, but look at how a small interest rate cut affects a part of DeFi - lending.

On-chain lending markets like Aave and Morpho dynamically price risk rather than relying on regulatory directives. However, the Fed's policy provides an important reference for this context.

When the Fed cuts interest rates, two opposing forces come into play:

1) Reverse...

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