Investors are 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, ICI said.
That’s considerably higher than even in 2008 after the banking collapse and stock market crash, showing the scale of divestment from assets last year.
Retail investors are holding $1.75 trillion, up by $7.6 billion. While institutional investors are holding $3 trillion, rising by $8.5 billion last week.
Rather than this cash being turned into investments, holdings are increasing even as stocks and especially crypto see some green for last month.
Bitcoin gained some 40% while eth rose by 32%, making January one of the best month since the 2021 bull.
As some of these cash holders will eventually invest in assets, with funds in money markets usually far lower than current levels, cryptos may well see more gains.
Because money markets are just where you park dollars, rather than expecting any growth of the capital. With inflation, that can lead to a dilution.
“A money market fund is a low-risk investment that gives you a place to hold rather than grow your savings,” Vanguard says.
They’re a highly liquid, near-term instrument like cash, cash equivalent securities and short-term Treasuries.
Rather than holding dollars in a bank account, wealthy individuals in particular use money market funds for sums above $250,000 as they are not FDIC insured.
That gives us a view into just how many investors are sitting on the sidelines and are potentially looking to enter the market.
Just how much this reflects on crypto specifically is not clear as investors may be holding their funds on exchanges, which usually don’t reveal dollar holdings.
But the all time high figure may indicate overselling last year, though how long these investors might hold out is anyone’s guess.
