Stablecoin Expansion to Lower US Neutral Rate
Federal Reserve Governor Stephen Miran warns that rapid stablecoin expansion could lower the U.S. economy’s neutral interest rate. The neutral interest rate is the level neither stimulating nor restricting growth. Sustained stablecoin expansion enhances liquidity and cuts funding costs in digital markets, creating structural downward pressure on benchmark rates. Over time, this dynamic may push Fed policy rates lower and signal a more accommodative monetary policy. For crypto traders, a falling neutral rate could boost risk assets, including cryptocurrencies, by easing funding and encouraging bullish market sentiment.
Bullish
Stephen Miran’s comments point to downward pressure on the neutral interest rate driven by stablecoin growth. In the short term, crypto traders may see increased liquidity and lower financing costs, fueling buying interest in digital assets. Over the long term, an accommodative Fed stance could sustain bullish momentum, as lower benchmark rates tend to boost valuations in risk-on markets. Historical precedents show that easier monetary conditions often coincide with rallies in cryptocurrencies. However, traders should monitor stablecoin market size and Fed communications for signs of policy shifts that could trigger volatility.