Cash Pile Rotation Could Drive Up Bitcoin Prices

As the Federal Reserve's rate-cutting cycle continues, a significant amount of cash is being held in US money market funds. Historically, around 500-1000 days after the FED begins rate cuts, liquidity begins to leave these funds and flow into the markets.

The current situation presents an opportunity for investors to reassess their allocations and consider rotating back into riskier assets. The $7.8 trillion cash pile in US money market funds has been accumulating since September 2024, when the Fed began its easing cycle. This cash has a job to do, which is to optimize returns while minimizing risk.

The rotation path of this cash will have different consequences depending on where it flows into. It could stay in money market funds, roll into duration, move into credit, drift into equities, or leak into crypto rails. Each of these paths has a different set of incentives and outcomes.