Fidelity released a report outlining its 2024 outlook, predicting that institutions may gravitate towards DeFi Yields if the Federal Reserve initiates rate cuts. Additionally, an uptick in stablecoin yields could enhance the segment's appeal for institutions. However, for DeFi to become a viable option, the rate cut would need to be approximately 0.75%.

The underlying premise of the report is that DeFi yield increases with a higher risk appetite. While there is anticipation that DeFi yields will outperform Traditional Finance (TradFi) yields, the report underscores the importance of infrastructure development for DeFi's success.

In the previous year, Fidelity anticipated meaningful engagement with DeFi, which did not materialize. This was attributed to a significant shift towards US Treasuries, offering investors better yield opportunities due to the Fed's interest rate hikes throughout 2023.

Fidelity highlights Aave and Dai as potential avenues for higher yields, with Aave users earning attractive returns by lending stablecoins, surpassing US Treasury yields. Currently, Dai is yielding approximately 8.5% for Aave depositors, while USDC is fetching around 5%. The native tokens of these ecosystems, AAVE and DAI, are performing steadily, with AAVE experiencing a slight surge and DAI trading below the $1 mark.

Fidelity, known for spearheading the approval of the Bitcoin ETF application with assistance from BlackRock, has amassed substantial assets. As of February 9, 2024, BlackRock reported $4.2 billion in assets, while Fidelity reported around $3.5 billion. Their ETFs, IBIT and FBTC, each hold over $3 billion in assets, distinguishing themselves in the market.

With the Bitcoin ETF secured, Fidelity aims to attract institutions to the DeFi sector, contingent upon infrastructure development and a 0.75% rate cut by the Fed by the year's end.