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Investors were flush with cash like never before with money market funds holding nearly $5 trillion according to the Investment Company Institute (ICI), an all-time high.
“Total money market fund assets increased by $16.07 billion to $4.82 trillion” last week, said ICI.
That’s much higher than in 2008 after the banking collapse and stock market crash, showing the scale of the divestment of assets last year.
Retail investors held $1.75 trillion, up $7.6 billion. Meanwhile institutional investors hold $3 trillion, up $8.5 billion last week.
Instead of this cash being converted into investments, holdings are increasing even as stocks and especially cryptos look green for the past month.
Bitcoin is up about 40% while eth is up 32%, making January one of the best months since the 2021 bull.
As some of these cash holders will eventually invest in assets, with funds in money markets typically much lower than current levels, cryptos may see more gains.
Because the money market is just a place where you park your dollars, rather than expecting capital to grow. With inflation, that can lead to dilution.
“Money market funds are low-risk investments that give you a place to save rather than growing your savings,” says Vanguard.
They are short term highly liquid instruments such as cash, cash equivalent securities and short term Treasuries.
Rather than keeping dollars in bank accounts, especially wealthy individuals use money market funds for amounts above $250,000 because they are not FDIC insured.
That gives us a view of how many investors are sitting on the sidelines and potentially looking to enter the market.
How much this reflects on crypto specifically is unclear because investors may be holding their funds on exchanges, which do not usually disclose dollar holdings.
But the all-time high may point to last year’s overselling, though how long these investors last is unpredictable.
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