Bank processors, consumer lenders, and exchanges are the financial technology companies best positioned to benefit from the U.S. Federal Reserve's latest rate cut, according to Mizuho analysts, while Circle and its USDC stablecoin could face headwinds.
The Fed cut interest rates by 25 basis points to a range between 4% and 4.25% and signaled two more cuts before the end of the year. Lower interest rates can make traditional investments seem less attractive, which often leads investors to seek higher returns through alternative assets such as cryptocurrencies. Most major cryptos rose about 2% following the cut.
Mizuho conducted a quantitative analysis of 20 years of over 13 different fundamental and macroeconomic data items, ranging from payroll to spreads, to come to their conclusion on winners and losers. Both crypto and equity exchanges should benefit, the analysts said.
"These companies rely on trading commissions (est. 50-70%). Historically, trading activity — a proxy for commissions — tends to rise when rates are lower," Mizuho analysts led by Dan Dolev wrote Thursday in a note to clients, highlighting Robinhood Markets (HOOD), Coinbase Global (COIN), and eToro (ETOR).
Bank processors and lenders that rely on transaction account growth should also see tailwinds as rates decline. "This is primarily driven by changes in transaction account dollars, which tend to grow faster under lower-rate regimes," Dolev said.
On the flipside, stablecoin issuers such as Circle Internet Group (CRCL), which derives 100% of its revenue from the yield on assets like U.S. Treasurys, are likely to be most adversely impacted.
Lower traditional yields make protocols offering 5%-10% APY increasingly attractive, RedStone cofounder Marcin Kazmierczak said, which could accelerate TVL growth across lending platforms and drive demand for stablecoins as users seek yield optimization strategies.
Mizuho analysts maintained a "neutral" rating on COIN shares and raised their price target from $267 to $300. The firm has "outperform" ratings on HOOD and ETOR, while CRCL has a bearish "underperform" rating and $84 target. The firm has been slightly bearish on Circle since shortly after the company's explosive IPO in June.
Robinhood and eToro shares traded higher by 3% today, while Coinbase shares surged 8%, according to The Block's price data. Circle's stock was up about 5.8% at publication time.
