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.