Currently, $7.5 trillion is parked in US money market funds. This vast amount of capital is the new record high that risk asset traders have carefully looked at. why? This is because the yields are low and the Fed is preparing to cut interest rates, so this huge dry powder could be primed to be flooded with risky assets, including tech stocks and Bitcoin.
Money Market Fund and Dry Powder Dilemma
Money market funds have skyrocketed nearly $100 billion in just a few days. Barchart posted the figure on September 9 for $7.4 trillion, but since it was updated on September 13th it has reached $7.5 trillion.
Semantics? Perhaps, in any case, it's a huge wave of fluidity that may be looking for a new home soon.
Traditionally, this much of this bystander's cash has shown a huge pent-up appetite for risk, especially as interest rates drop and safe returns shrink. All rate reductions keep your cash attractive. So, when the Fed cuts rates, investors will look for high-yield risk-on opportunities such as Bitcoin and growth stocks.
Future fee reductions for the Fed is a hot topic. Most crypto traders and institutional analysts expect fresh liquidity to flow to the market after the cuts, and the new bull catalyzing volatile assets will be catalyzed. A lower rate means a simple, gradual financial position of capital and less incentives to park in money market funds.
Caution: Not everyone wants to cut interest rates
As Cryptoslate reported yesterday, it is not a unanimous political party. Voice critics such as Economists and Goldbug Peter Schiff call the Fed's rate “a big mistake,” warning that it could rekindle inflation and put the dollar at risk as a reserve currency.
Schiff points to Gold's rally as a forward signal for policy error, claiming that constantly easy money fuels dangerous bubbles and erodes long-term economic stability.
The size of today's money market funds is unprecedented, and we are undergoing new scrutiny of America's financial health. Currently, 23 cents of all taxes will be strictly on paying interest on US federal debt, an eye-catching figure that investors and policymakers are wary of.
The S&P 500 will reach record highs as unemployment rates rise and national debt rises. This dichotomy has analysts concerned about the misstep between Wall Street and Main Street. Stock market corrections usually occur after signs of weaker labor markets and slowing the economy.
7.5 trillion dollars: Keep looking at the numbers
With horizon reductions, historic money market liquidity, and financial worries, all eyes are about how dry powder will unfold. If investors spin a small portion of this $7.5 trillion into risky assets, the crypto market can make a dramatic profit.
Keep looking at the numbers. All rate movements, all inflation printing, and all financial headlines rewrite risky situations. With Bitcoin and risky assets, opportunities and volatility never looked great.
