Fed rate cuts could trigger $7.4T liquidity surge into Bitcoin, stocks
|Money market funds (MMFs) hold $7.39 trillion in assets as of October 8, 2025. This marks a record high, up from $3.8 trillion in 2009. Investors shifted cash here amid high yields above 5% and market uncertainty. Corporations and pensions treat these funds as safe havens for short-term securities like Treasury bills.
Fed signals further rate reductions
The Federal Reserve cut its benchmark rate by 25 basis points in September 2025, to 4-4.25%. Officials project two more cuts by year-end if labor data weakens further. Markets price in 150-200 basis points of easing through 2026. This could drop T-bill yields below 4%, reducing MMF income by $100-140 billion annually.
Liquidity shift targets risk assets
Lower yields may drive 10% of MMF assets—$739 billion—into equities and bonds. Historical shifts, like 2009's $500 billion move, fueled broad rallies. Institutional channels, including ETFs, will amplify flows. High-yield spreads could tighten, boosting credit markets. Speculation marks larger rotations as potential market drivers, based on past patterns.
Bitcoin ETFs attract institutional flows
Bitcoin spot ETFs saw $3.5 billion in weekly inflows in early October 2025. BlackRock's IBIT alone drew $3.5 billion that week, nearing $100 billion in assets. Total 2025 inflows hit $26 billion. Bitcoin's fixed supply draws capital as a scarcity hedge. Analysts speculate 5% MMF shifts could lift prices to $280,000-$350,000, though flows often favor bonds first.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.