The Fed is cutting. The treasury market is signaling lower rates ahead. Here is what that means for BTC loan rates, why the correlation is not as strong as you think, and which platforms benefit most.
The naive view
Lower Fed funds rate → lower cost of capital → lower lending rates across the board → BTC loan rates come down. This is what most people assume.
Why it is more complicated
BTC loan rates are not primarily set by Fed policy. They are set by the supply and demand for BTC-backed credit — which is driven by crypto market dynamics, institutional demand for liquidity, and the yield that platforms can generate on loaned BTC.
When BTC rallies, borrowing demand increases. When BTC drops, platforms face liquidation cascades and reduce their lending appetite. Both dynamics push rates in directions that have little to do with the Fed.
Who benefits most from rate cuts
CeFi platforms with traditional funding: Ledn, Figure, and Arch all borrow capital from traditional markets to fund their lending operations. When those markets get cheaper, they can offer lower rates. Unchained benefits from this dynamic.
DeFi protocols: Less directly affected. Lava's rates are set by on-chain supply and demand dynamics. If BTC lending demand surges post-rally, rates on DeFi can spike even as the Fed cuts.
My 2026 outlook
My base case is that CeFi rates compress 50-100bps over the next 12 months if rate cuts feed through. DeFi rates will remain volatile and may stay premium to CeFi unless protocols update their risk models. For borrowers with $500K+ positions, the decision is whether the value of locking a 12-24 month term outweighs waiting for better pricing. Use our comparison tool to review the current Pledge snapshot across tracked platforms.