Fed Rate Cuts Could Shift $7.4T Liquidity into Bitcoin, Stocks

Money market funds (MMFs) reached a record $7.39 trillion in assets as of October 8, 2025, up from $3.8 trillion in 2009. Investors are drawn by yields above 5% and market uncertainty. Corporations and pensions use MMFs for short-term securities like Treasury bills.

Fed Signals Further Rate Reductions

The Federal Reserve cut its benchmark rate by 25 basis points to 4-4.25% in September 2025.
Officials anticipate two more cuts by year-end if labor data weakens.
Markets expect 150-200 basis points of easing through 2026.
Potential T-bill yield drop below 4% could reduce MMF income by $100-140 billion annually.

Liquidity Shift Targets Risk Assets

Lower yields might drive 10% of MMF assets ($739 billion) into equities and bonds.
Historical shifts, such as 2009's $500 billion move, led to broad market rallies.
Institutional channels like ETFs may amplify these flows.
High-yield spreads could tighten, boosting credit markets.

Bitcoin ETFs Attract Institutional Flows

Bitcoin spot ETFs saw $3.5 billion in weekly inflows in early October 2025.
BlackRock's IBIT attracted $3.5 billion that week, nearing $100 billion in assets.
Total 2025 inflows reached $26 billion.
Bitcoin's fixed supply is appealing as a scarcity hedge.
Analysts suggest a 5% shift from MMFs could elevate prices to $280,000-$350,000, though bond flows are often prioritized.