Why Ethereum DeFi Assets Soared the Highest on Jerome Powell's Speech

At the beginning of the week, markets were nuking. Stocks were red, crypto was bleeding, and everyone was on edge.

A friend messaged me asking why the market felt so heavy. My answer was simple: uncertainty. Jerome Powell, the chair of the Federal Reserve, was scheduled to speak on Friday at Jackson Hole, and no one knew what he was going to say. Traders hate not knowing. So people de-risked, sold positions, and waited.

Fast forward to today, and Powell melted faces, with those betting on Ethereum DeFi becoming big winners.

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Why Ethereum DeFi Assets Soared the Highest on Jerome Powell's Speech

A softer jobs market opened the path for rate cuts, which could draw investors seeking yield into DeFi.

Federal Reserve Chair Jerome Powell shocked markets Friday at Jackson Hole by signaling the Fed is preparing to cut interest rates as soon as September. In a closely watched speech, Powell flagged concerns about a slowing labor market even as tariffs continue to push consumer prices higher.

The comments marked a clear pivot from the Fed’s inflation-first stance of the past four years and instantly lit a fire under risk assets. Ethereum jumped as much as 14% to $4,800, leaving it on the brink of a new ATH. In contrast, BTC is only up 4%. Meanwhile, the odds of a 25 bps cut in September rose from 60% to 80% on prediction platform Polymarket.

Economist Alex Kruger summed up the mood in real time: “Remarkably dovish Powell, market was not expecting that at all.”

But in crypto, the assets that soared the most were either yield-bearing or related to DeFi, especially on Ethereum.

Powell’s Change of Heart

Powell acknowledged the balance of risks has changed. For most of this cycle, the Fed’s worry was runaway inflation. But now, Powell admitted that jobs and growth are at risk. He described a “curious kind of balance” in the labor market: both supply and demand for workers are slowing at the same time. That unusual setup, he warned, could quickly flip into layoffs and rising unemployment. In his words, “the balance of risks appears to be shifting.”

That alone was enough to get traders buzzing. But Powell went further. He suggested the Fed is moving away from its “average inflation targeting” framework — the strategy introduced in 2020 that allowed inflation to run moderately above 2% for a while to make up for periods it had run below. That framework was designed for a world of near-zero interest rates, but Powell acknowledged today’s landscape looks very different.

The Fed still has a 2% inflation target, but Powell emphasized that stable inflation expectations can’t be taken for granted. He admitted tariffs are lifting consumer prices, yet downplayed fears this would lead to a new inflation spiral. 

Translation: the door to rate cuts is wide open.

Ethereum and ETH Beta Jump 

Powell basically paved the way for a September cut, which is generally bullish for risk assets. In the hours after his speech, nearly $400 million in liquidations swept through crypto markets as shorts got steamrolled. Stocks ripped, but crypto ripped even harder.

“R.I.P. those who got hunted and sold the lows right before Jackson Hole,” Kruger wrote. 

While it was a broad risk-on move, the biggest moves came from Ethereum and its orbit. ETH itself surged double digits, and seven of the 10 best-performing tokens on the day were ETH beta plays: MORPHO, ENA, AERO, ARB, LDO, ENS. Even ETC, long dismissed as a “dino coin,” soared 18%. 

The only non-Ethereum name in the top 10 was SPX69000, a memecoin. 

Since Ethereum is the home of DeFi, with $94 billion in total value locked, it seems capital is flowing toward Ethereum-linked assets and yield-bearing products. 

MORPHO, AERO, and Ethena’s ENA were among the strongest movers, rising as much as 20%.

“We see flows into Morpho for capital‑efficient lending, Lido for staking yield, Ethena for synthetic dollars that behave like savings instruments, and Aerodrome as the liquidity hub on Base,” Lingling Jiang, partner of Falcon Finance, told Unchained.

DeFi Answers the Quest for Yield

On a recent episode of Bits + Bips, Maple Finance co-founder Sid Powell explained why this might have been the case: “As traditional rates drop, crypto spreads and rates widen, which I think will pull more money onchain. It’s kind of similar to what we saw in 2020 and 2021 when TradFi rates were near zero and you could lend in crypto at 10% or more.” 

Lower rates make DeFi yields stand out more because the gap between onchain returns and TradFi gets wider, which benefits DeFi-related tokens.

Prashant Maurya, CEO and co-founder of decentralized GPU network Spheron, told Unchained, “Cheaper borrowing costs and more liquidity entering crypto markets amplify DeFi activity, making these tokens natural beneficiaries of a dovish Fed.”

ENA, the native token of Ethena, the issuer of the USDe stablecoin, is up 19% in the past 24 hours. 

Ethena Labs founder Guy Young gave an explanation on X, though he cautioned that, of course, he’s a bit biased. “During the last rate cuts in Q4 ’24 we saw funding benchmarks widen as a spread to T-bills from ~0% to more than 20% in a few weeks. USDe supply doubled during that period. If we see that again now, we’ll see >$20B USDe supply in less than a month. Ethena is the most levered asset on earth to falling interest rates.”

The institutional lens is just as bullish. “Capital is shifting into stablecoins with yield and tokenized Treasuries,” Lingling Jiang of DWF Labs told Unchained. “For many institutions, these are starting to look like modern cash instruments.”

To sum it up, Powell lit the match for the next risk-on cycle. As Iliya Kalchev of Nexo put it on a note sent to Unchained, “With macro headwinds easing and institutional demand waiting in the wings, Bitcoin looks set to turn Jackson Hole’s words into its next tailwind.”

But the big question now is: will the rally hold? 

“The durability of this move will hinge on keeping real yields in line with market rates and avoiding governance or security shocks,” Jiang said.

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