The US market funds. UU. They currently have more than $ 7 billion, which some analysts believe that they could soon turn in various kinds of assets, including cryptocurrencies, potentially feeding the next leg higher in Bitcoin. and alternative cryptocurrencies (Altcoins).
A monetary market fund is a type of mutual background that invests in high quality short -term debt instruments, such as treasure invoices, deposit certificates and commercial paper.
Total money market assets increased by $ 52.37 billion to $ 7,26 billion for the week ending on September 3, according to the investment company Institute (ICI). The assets of retail market funds increased by $ 18.90 billion to $ 2.96 billion, and institutional funds increased by $ 33.47 billion to $ 4.29 billion. ICI informs the assets of the money fund to the Federal Reserve every week.
The monetary market funds have increased in recent years, initially attracting money due to their refuge appeal during the crisis induced by the Coronavirus of early 2020 and later during the cycle of the increase in Fed rates, which increased yields and attracted investors.
Tickets remained robust at the end of last year, even when the FED reduced the rates of 5.25% to 4.25%. However, more rates cuts could incite investors to change a significant portion of their cash pile to other assets, including cryptocurrencies, according to David Duong, head of institutional research in Coinbase.
“There are more than $ 7 billion of funds within the money market, and all that is retail money. As those target cuts begin, all that retail cash flow will really enter other classes of assets such as shares, crypto and others,” Duong told Coindesk in an interview.
The US Central Bank is expected to use its objective rate in at least 25 basic points when it meets next week, according to the CME Fedwatch tool. Some market participants anticipate a 50 BPS reduction.
Traditional market observers are equally excited with the cash pile of the money market. In an interview with Boutique Family Office & Private Wealth Management, the main investment strategist of Cresset, Jack Ablin, declared that the target cuts could redirect the flows of the monetary market to shares and cryptocurrencies.
“There are a little more than $ 7 billion in monetary market funds that produce around 4.5%. If that yield is reduced to 4.25%or 4%, that could cause more investors to return effective in shares,” said Ablin.
Rotation depends on the broader economic environment
While the money pile of the money market is expected to soon flow towards more risky assets, this rotation is not guaranteed.
The extent to which investors deploy the funds depend on the broader economic environment. Therefore, if rates cuts occur in the context of economic deceleration or the greatest economic uncertainty, many investors may prefer to continue with money from the money market.
These funds offer relatively stable yields and immediate access to cash, which makes them an attractive option when growth in growth and financial markets decrease. Then, despite the lowest yields of rates cuts, investors can remain cautious, maintaining considerable balances in the money market funds.
According to Endgame macro of observer Pseudonymous, record investment of the money market is actually a sign of imminent economic pain.
“We only see accumulations like this when investors want yield, but they do not want to assume the duration or risk of capital. It happened after the bust of Como com, again after the GFC, and in 2020-21 when the rates were enrolled and the money was expected on the site,” said the final game of macro in X.
The observer added that as rates decrease, money is first assigned to treasure notes and then to more risky assets.
The risk of duration refers to the sensitivity of a fixed income investment (captivity) price to changes in interest rates. In the context of monetary market funds, which invest in short -term debt instruments with maturities generally below one year, the risk of duration is relatively low compared to longer term bonds.
According to the macro of the final game, the rotation depends on the size of the imminent speed cut.
“The most important question is not only if the short Fed is how. A 25 BPS cautious movement allows money funds to be gradually discarded, while a 50 BPS cut could accelerate the change, pushing effective to the treasure bonds first and then the risk assets as the performance advantage disappears. With $ 7.4 billion waiting, the scale of the rotation is so so important,” he said.
