An interesting recent note: after the Federal Reserve began a rate cut cycle, the US dollar index hit its lowest level since 2017, with a nearly 10% decline in 2025. It is worth discussing the logic behind this change.

Let's start with the basics of USDT. Tether issues the stablecoin USDT, pegged to the dollar, which plays an important role in cryptocurrency trading. It maintains a 1:1 conversion mechanism with the dollar, which is the foundation it relies on in the market. But when macroeconomic conditions change, this seemingly stable relationship can become disrupted.
What does a weak dollar mean? When expectations of rate cuts lead to a decline in the dollar's value, traders holding USDT face an interesting paradox — although the nominal value of USDT remains unchanged, its purchasing power for other assets will change relatively. This often prompts investors to reallocate their assets, and funds may flow from traditional markets into the cryptocurrency market in search of higher yields. We have already seen the Hong Kong market attract significant Asian capital flows as a result.
In terms of trading, USDT trading volume usually increases in such an environment. The rate cut cycle is often accompanied by shifts in risk appetite in the market, increased activity in the crypto market, and a rising demand for liquidity in USDT as a primary settlement tool.
But attention should also be paid to another aspect — market uncertainty may increase. Although rate cuts inject liquidity, they may also raise concerns about inflation expectations and exchange rate volatility. In such cases, investor confidence in tools like USDT is tested, and changes in the regulatory environment will affect the market's acceptance of stablecoins.
Overall, the impact of the Federal Reserve's rate cut on USDT is multi-dimensional. Traders should monitor the dollar trend, changes in risk appetite, and regulatory developments to make more informed decisions.