There’s a $7.8 trillion pile of cash in U.S. money market funds, earning, rolling, and waiting. The Fed began this easing cycle on September 18, 2024, and it has now been 522 days since the first rate cut.
Looking at past market movements, we are typically entering a period where funds start to move back into riskier assets. Bitcoin analyst Matthew Hyland made this very claim regarding X over the weekend.
Historically, liquidity begins to flow out of money market funds and into the market about 500 to 1,000 days after the Fed starts cutting interest rates.
Calendars help with setup, but the results are determined by incentives.
The latest weekly data from the Investment Company Institute shows total assets in money market funds for the week ending February 18, 2026, of $77,910,000, including government Funds account for $6.405 trillion, prime funds account for $1.242 trillion, and tax-exempt funds account for $0.144 trillion.This distribution shows where demand is concentrated, close to the Treasury, and close to daily liquidity.
We can think of this as “cash on the sidelines,” reserves that could flood into risky assets when the Fed turns a corner.
However, cash is a yield product. There are incentives, obligations, monthly statements, and a reason why you got accumulated here in the first place. Interest rates have gone up, yields have gone up, and cash has become more of a question mark, but now with interest rates down, the question has shifted from scale to direction.
The effective federal funds rate is 3.64% in the January 2026 monthly print, down from 4.22% in September 2025, but this is simply return compression and changes what you pay for something “safe.”
You can also see it in the money fund yield tracker. The Crane Index remained at around 3.58% for the week ending January 2, 2026, a quiet yield that narrows the gap between expectations and what is achieved. The pile of cash still looks high on the chart, but the road below it is a slope, and slopes create movement.
The simple reservoir that existed in the Fed’s overnight reverse repo facility has already been reduced to nearly zero at $496 million as of February 20, 2026, and the next “liquidity story” will lie in portfolio selection rather than mechanical facility easing.
Cash can stay in place, roll into duration, move into credit, flow into stocks, or flow out into cryptocurrency rails, with each path leading to different outcomes.
The pile of cash has a job, and that job shapes the exit.
Money market funds hold multiple types of money. According to ICI’s weekly split, there are $3.082 trillion in retail money market funds and $4.709 trillion in institutional funds.Institutional money has a different attitude, pays vendors, backs lines of credit, covers payroll cycles, exists as a policy, and those policies move slower than memes.
This configuration sets the baseline for flow calculations. A 1% change in total money market assets is equivalent to approximately $78 billion, a 5% change is equivalent to approximately $390 billion, and a 10% change is equivalent to approximately $779 billion. These numbers are interesting even before we discuss where they will land, as they indicate how big a gear the interest rate path is about to turn.
The incentive lever is yield, which follows Fed policy.
Morgan Stanley frames it in plain language that investors actually live by: Money market yields are following the Fed, compressing profit margins, and investors are reassessing their position as they go along. The forward-looking part is simple. The further down the path the ledger begins to ask, “What else will I be paid for?” and the answer will depend on your risk tolerance and authority.
Macro liquidity watchers will also keep an eye on the Treasury’s own cash balances and the Fed’s balance sheet. This is because both change the waterline of reserves and loans.
The Fed’s balance sheet WALCL was $6.613 billion, compared to the Treasury General Account’s weekly average of about $912.7 billion for the same week, and both of these numbers, which traders read like gauges, are a reminder that cash is a system with valves.
Rotation Pass, Period First, Risk Later, Cryptocurrency as Thin Rails
The rate cut cycle creates a menu and the first course looks like term and credit. Morgan Stanley notes that in past periods of easing, investment-grade bonds have outperformed cash equivalents between the end of rate hikes and the end of rate cuts, providing a sound alternative to the idea that outflows from money markets automatically translate into inflows into stocks and cryptocurrencies.
This detail is important for Bitcoin. Because it depends on the marginal flow, and the marginal flow depends on which bucket the investor chooses initially. In a world where cash is rolling into bonds, rotation still exists and risk bidding appears to be more measured. But when cash jumps the bond aisle and reaches for risk, the rotation becomes discontinuous.
Cryptocurrencies have their own liquidity mirrors. The stablecoin market is $308 billion, USDT $186 billion, and a balance sheet of on-chain “cash” that can expand as risk appetite increases and contract as the system tightens.
Stablecoins play a different role than money market funds, and it is useful to compare them. Each is a wrapper for short-term value storage, and each wrapper moves as opportunity cost changes.
Bitcoin also has a relatively new introduction pipeline in spot ETFs in the US. The sum of inflows and outflows is the ruler of money market scenario calculations. Because if you compare the hypothetical $39 billion shift to the realized $61.3 billion ETF intake, you can see how quickly scale starts to matter.
3 scenarios, 1 pile of cash, different outcomes
- Tenacious funds, a cautious Fed, and a gradual flow. Inflation progress remains uneven and policymakers remain alert to upside risks to inflation, a stance reflected in the Financial Times reporting, which included discussion of the possibility of rate hikes as a risk scenario. In this process, money market yields slowly decline, funds remain invested, and outflows are small, about 0-2% over 12 months, about $0-156 billion, with much of it moving into the fixed income ladder and higher-end durations as return differentials change. Bitcoin’s path in this scenario follows broader risk sentiment and a steady pace of ETF demand, with the “cash wall” largely remaining in the picture.
- Soft landings, faster cuts, pursuit of returns. The Fed’s own forecasts provide a map of what that will look like. The December 2025 Economic Forecast Summary shows the median federal funds rate at 3.4% by the end of 2026 and 3.1% by the end of 2027, a long slope that compresses the yield gained by waiting. In this path, the trigger looks like a further decline in money fund yields, and the Crane Index is a weekly indicator of how quickly incentives can change. Spills fall into broader buckets and have a wider range. That’s an increase of 5-10% over 12 months, or about $390 billion to $779 billion. Even a split that maintains confidence in the actions of institutional investors could result in a large portion going to fixed income and credit, a small portion to equities, and a small portion to crypto rails, with even a 0.5% share of total money market assets amounting to about $39 billion.
In this scenario, Bitcoin becomes a flow commodity, and the story revolves around the microstructure of the market, increasing supply meeting increasing demand, and prices tending to rise rapidly rather than gradually.
- Recession reduction and flight to safety first, policy relaxation later. The rate cut arrives with a bleak macro soundtrack, spooking risk assets and increasing demand for cash as investors rebuild buffers. In that world, money market funds could grow, a 3-8% increase in assets under management, about +234 billion to +623 billion, would become plausible, and the rotation story, at least in the first phase, would turn into a hoarding story. Bitcoin’s reaction during this process is like a whip, with first the risk of a drawdown and then the possibility of a withdrawal, with timing being the dominant variable.
What all three scenarios have in common is incentives. The Fed began cutting rates on September 18, 2024, moving 50 basis points to its target range of 4.75-5.00%, but the calendar thereafter has moved faster than funds, with the market focused on yield slopes and allocation choices.
Global background, weekly highlights, and first gauges to move
Macro stories become stale if you base them on a durable context.
The IMF’s January 2026 update forecasts global growth of 3.3% in 2026 and 3.2% in 2027, a baseline that supports the soft-landing narrative even as regional risks remain, and is important for risk assets because growth expectations, like yields, influence allocation behavior.
Meanwhile, the Fed’s ON RRP facility, the plumbing gauge that drove much of the liquidity conversation at the beginning of the decade, has already been depleted to near zero, and attention has returned to the slowing gears, the composition of money markets, institutional constraints, and the relative returns of bonds, stocks, and alternative assets.
It also explains why the “cash on the sidelines” framework feels both true and incomplete. Cash exists, but its exit is not mechanical. It requires a decision, and with that decision comes incentives.
To track that process, a series of small repeating gauges is more important than a heading.
Money market assets and composition: ICI’s weekly report provides a base map, total assets under management, government and prime shares, and retail and institutional splits.
Money fund yield: Crane’s index succinctly illustrates the incentives to maintain the status quo.
Rate pass: The effective federal funds rate shows how much your “cash” actually earns.
Forward guidance: The Fed’s projected destination in the SEP confirms expectations.
System piping: ON RRP, WALCL, and WTREGEN show how reserves and liquidity are changing.
Cryptocurrency internal cache: Stablecoin supply and daily and cumulative Bitcoin ETF flows indicate how much of that rotation is hitting the digital rails.
Taken together, these indicators provide a clearer way to talk about “liquidity” and keep us grounded as markets try to make it a slogan.
There are ways in the market to turn a calendar into a destiny and a pile of cash into a prophecy.
You get a better reading from incentives and pipes, sliding yields, wrappers that reprice, obligations to ease or maintain, and a series of flow rails that turn small percentages into big numbers when you meet assets built for marginal demand.
(Tag translation) Bitcoin
