Imagine this scene: the Federal Reserve suddenly changes its stance on interest rate decisions—not a gentle 25bp, but a direct cut of 50bp or even 100bp. You will see fireworks of 'risk asset euphoria' on Twitter, but I want to remind you of a harsher reality: the real impact of interest rate cuts is not on cryptocurrency prices, but on the 'pricing system of the dollar on-chain.' Everything anchored to short-end rates—on-chain government bonds, money market fund tokens, cash management yields, and the 'sustainable yield' of stablecoins—will be forced to reprice.
By 2025, we have already seen the trend: the Fed lowers the interest rate range to 3.50%–3.75%, and the market's imagination of 'further easing' begins to rebound; some officials even publicly discuss the possibility of 'a full point cut at most.' If your scripted scenario (a one-time cut of 50/100bp) occurs next, on-chain funds will undergo a three-stage migration—and these three stages of migration will ultimately push the theme back to a core: USDD.
The first phase of migration will occur in the 'on-chain government bond layer'. Over the past year, the strongest incremental RWA has almost all come from the tokenized US Treasury bonds/money market funds line: the reason why BlackRock's BUIDL, such a cash equivalent, can explode on-chain is that it has made 'dollar interest rates' into combinable building blocks - you don't need to leave the chain to get close to government bond yields, and you can take shares for collateral, margin, and funding efficiency tools. However, once the Federal Reserve suddenly cuts rates sharply, short-end yields will first be pushed down, and the attractiveness of BUIDL and similar 'on-chain cash equivalents' will immediately change from 'earning interest while lying down' to 'more like stable collateral'. RWA will not disappear, but it will shift from 'yield narrative' back to 'collateral narrative'.
The second phase of migration will occur in the stablecoin itself: when the government bond layer yields decline, the market will more sensitively question - what is your dollar really relying on for stability? And what can justify a hold incentive for me? This is why the position of USDD 2.0 suddenly becomes critical: it is not competing with the government bond layer for the same thing, but rather filling in the half that the government bond layer cannot achieve - the universality and retrievability of 'on-chain cash'. The foundation of USDD 2.0 is over-collateralization, placing the repayment boundary on-chain; its anchoring is not based on sentiment, but rather on PSM's 1:1 exchange channel, making 'returning to around 1 dollar' an executable path; it also emphasizes multi-chain native, making it more like ecosystem-level cash, rather than a localized tool trapped in a single network.
The third phase of migration is the one that is easiest to overlook, but most decisive: lowering interest rates will turn 'real returns' from a bonus item into a lifeline. In the past, when interest rates were high, many on-chain yields seemed reasonable - because money could 'earn interest' anywhere. But once interest rates are sharply cut, the market will begin to liquidate two types of things:
One is the illusion of yields supported by subsidies;
The other is the reality of yields supported by structure and funding efficiency.
The cleverness of USDD 2.0 lies in its attempt to change yields from 'giving out sugar' to 'protocol endogenous': by using Smart Allocator to allocate protocol reserve funds to relatively blue-chip on-chain lending scenarios within risk control limits, and then flowing profits back to ecosystem participants in a mechanism way, with forms like sUSDD to bear value changes (yield performance should be based on the current page and on-chain data, and should not be considered a guarantee). This will make USDD more like a logical answer that can be clearly explained in an environment where 'rate cuts compress all yields': yields may thin out, but the path must be explainable.
Connecting the three phases of migration, you will see a very counterintuitive conclusion:
If the Federal Reserve lowers interest rates by 50/100bp all at once, the first thing that might be weakened is the 'yield halo of on-chain government bonds', but the first thing that will be amplified is 'who decides on on-chain cash'. Because when the interest rate bonus recedes, funds will no longer only look at 'who gives more', but will pay more attention to 'who is more like cash': verifiable, retrievable, cross-ecosystem, and not dependent on a single point of failure in extreme moments. Therefore, the narrative of USDD will be more pure - it doesn't need to win everyone's preference, but it will become the part of 'dollar base' that more and more people are willing to stay on-chain during macro turning points.
So I will summarize this hypothetical deduction in one sentence:
Lowering interest rates is not giving the cryptocurrency market a red envelope; it is resetting the pricing system of 'on-chain dollars'. In this system, the RWA government bond layer is more like a collateral base, while stablecoins are more like cash fluid; and when the fluid needs to be redistributed, you will care more about which form of dollar allows you to be 'available at any time, retrievable at any time, combinable at any time'. This is what USDD is talking about.
If the next meeting really presents the scenario you set: a sudden rate cut of 50bp or 100bp - do you think on-chain funds will first rush towards risk assets or will they first rebuild the 'cash layer'? Which form of dollar would you keep on-chain as a base?
Disclaimer: The above content represents the personal research and views of 'carving the boat to seek the sword', and is for information sharing only, not constituting any investment or trading advice.