For the December 10th Fed meeting, the market has already set up a celebration for the expected rate cut. But have you noticed a strange phenomenon? Everyone is shouting “the rate cut is coming,” yet long-term US Treasury yields are actually spiking—what’s really behind this?

Let’s talk about the rate cut first. Traders are betting the probability of a December rate cut at over 80%, and the S&P 500 has surged toward the 6,900 level. But here’s the issue: with expectations running so high, when the shoe actually drops, could it end up being a “sell the news” event? Not to mention, the Fed is still internally divided over inflation data and economic weakness—this disagreement is a ticking time bomb in itself.

My view is that you need to keep a close eye on the 6,880-6,900 range right now. If the market can’t break through, a pullback to 6,700 wouldn’t be surprising. Plus, the flow of funds after a rate cut could shift—those tech giants that have skyrocketed might get dumped, with capital moving toward small caps and value stocks instead. It’s better to be prepared for both scenarios than to be caught off guard.

But what’s truly interesting is another undercurrent: stablecoins are devouring the US Treasury market at an astonishing pace.

The scale of tokenized Treasuries has soared past $7.4 billion, growing even faster than traditional stablecoins. Heavyweights like BlackRock and Fidelity are jumping in, and the US has even rolled out the “GENIUS Act” to give them the green light—requiring 1:1 reserves of high-quality assets, and explicitly stating, “this is not a security.” Think about what this move means: the Treasury clearly wants to use compliant stablecoins as a digital tool to extend the dollar’s dominance and secure a voice in the global digital economy.

It all seems rosy: stablecoin issuers become new buyers of Treasuries, creating extra demand. But the Bank for International Settlements (BIS) has thrown cold water on this—they warn that when money exits, the shock to Treasuries could be even more severe than the impact of inflows. Makes sense: these stablecoins can be redeemed at any time, and if there’s a market panic, the selling pressure on Treasuries could explode instantly.

So the takeaway here is clear: if you’re playing with stablecoins, you must keep a close eye on the issuer’s transparency and compliance. Projects with unclear reserves or dubious audits can “depeg” and collapse at any moment. The real opportunities lie with platforms backed by traditional finance and recognized by regulators.

Back to the present: rate cut expectations are already overheated, and now it’s all about the actual reaction after the fact. Rather than chasing the highs, it’s wise to keep some dry powder on the sidelines. After all, markets never lack for stories—what they lack is preparation for risk.