A growing number of investors are starting to shift their liquidity from traditional instruments like Treasury bills and money market funds into decentralized finance (DeFi) platforms, as anticipation builds around possible U.S. Federal Reserve rate cuts.
On-chain data and financial trends show that a portion of the trillions of dollars tied to fixed-income assets is preparing to move into decentralized, yield-generating strategies. DeFi stablecoin lending has emerged as a major beneficiary of this trend.
What can you do to frontrun rate cuts like Smart Money?
Accumulate major public network tokens where Genius Act issuers can issue their Stable Coins ($SOL $SUI $ETH are the main networks)
Transfer your bank dollars to digital dollars aka Stable Coins ($USDC and $USDT… https://t.co/OP4Ffa23oT
— MartyParty (@martypartymusic) July 16, 2025
The TradFi Picture: Trillions in Low-Yield Cash
As of July 2025, U.S. money market funds hold approximately $7.07 trillion in assets, with yields currently ranging between 4.2% and 4.4%. At the same time, the U.S. Treasury securities market, a pillar of the global financial system, has roughly $28.7 trillion in outstanding supply.
Related: Can Algorand’s Instant Finality and DeFi Surge Ignite a Major Rally Toward the $1?
Yields on these government bonds, while historically competitive, may soon become less attractive if the Federal Reserve proceeds with interest rate reductions later this year. As of July 15, three-year Treasury notes yield approximately 3.93%, while ten-year bonds stand at 4.50%.
DeFi’s Benefit: Earning Up to 22% on Stablecoins
With expectations for falling rates in the traditional markets, savvy investors are exploring digital alternatives. Stablecoin pairs on major DeFi platforms are currently generating yields between 12% and 22% annually, based on lending demand.
This yield is paid to users who provide liquidity to decentralized payment and lending protocols. A key benefit of these pools is that since both sides of the trading pair are pegged to the U.S. dollar (e.g., USDT/USDC), participants are not exposed to the “impermanent loss” that can affect other types of DeFi investments. These pools also allow for instant withdrawals (minus standard blockchain gas fees) and are not subject to principal loss, as long as the stablecoins hold their peg.
How the Capital Rotation Works
The infrastructure for this shift is being built out now. Public blockchains like Ethereum, Solana, and Sui are becoming central hubs for stablecoin issuance, a trend that is being supported by proposed legislation like the U.S. GENIUS Act.
Related: Hong Kong Enacts Stablecoin Ordinance, Launches High-Threshold Licensing Regime
This new framework makes it easier for digital dollars to be transferred from traditional bank accounts into stablecoins. Those stablecoins can then be deployed directly into DeFi lending pools, effectively shifting money market activity from Wall Street onto the blockchain.
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