Grayscale: Federal Reserve May Keep Rates High Long Term, Bearish for Bitcoin but Bullish for Circle and RWA

BlockBeats News, May 16th, Grayscale's Director of Research Zach Pandl wrote that against the backdrop of rekindled US inflation, the Federal Reserve may maintain a high interest rate policy in the long term, impacting the crypto market in three core aspects. He believes that with the US CPI approaching 4%, the newly appointed Fed Chair Kevin Warsh has little room to cut rates, and the market now expects the first rate cut to be delayed until September 2027.

Grayscale pointed out that a long-term high interest rate will create pressure on "currency debasement trades" such as Bitcoin. Since Bitcoin, like gold, is an interest-free asset, higher real interest rates will increase the opportunity cost of holding US dollar assets. However, it remains optimistic about Bitcoin's long-term prospects and believes that regulatory positives such as the "CLARITY Act" can partially offset the related pressure.

Furthermore, it believes that a high-interest-rate environment will accelerate the tokenization of fixed-income assets. The current yield on USD fixed-income products is higher than most DeFi yields, for example, the USDC borrowing rate on Aave is about 3.6%, while the short-term corporate bond yield is around 4.5%. Grayscale also stated that stablecoin issuers will benefit from high-interest rates. Due to the "GENIUS Act" prohibiting stablecoins from paying interest to users, issuers can retain reserve asset income. It estimates that for every 25 basis points increase in short-term rates, Circle's revenue will increase by approximately $190 million.