TLDR
- U.S. money market funds hold a record $7.26 trillion that could flow into crypto when Fed cuts rates
- Arthur Hayes predicts a 50 basis point Fed rate cut in September based on weak jobs data
- Money market investors may seek higher yields in DeFi protocols offering 7% returns
- Hayes bought 1.34 million ENA tokens and predicts the price will reach $1.50
- The rotation depends on economic conditions – recession fears could keep money in safe assets
U.S. money market funds have reached a record high of $7.26 trillion, setting up a potential massive shift into riskier assets including cryptocurrencies. Total money market fund assets increased by $52.37 billion for the week ended September 3, according to the Investment Company Institute.
The Federal Reserve is expected to cut interest rates by at least 25 basis points when it meets next week. Some market participants anticipate a 50 basis point reduction following weak jobs data that showed only 22,000 new positions created, well below the 75,000 expected.
šØ MARKETS FULLY PRICING IN A 100% CHANCE OF A FED RATE CUT THIS MONTH
š» 25 BPS CUT ā 88.4%
š» 50 BPS CUT ā 11.6%š„ CRYPTO LOVES IT ā BITCOIN ABOVE $113K š„#FEDRateCut #Crypto #Bitcoin #InterestRates #FinanceNews #Investing pic.twitter.com/wKy2vuIiET
— Crypto News Hunters šÆ (@CryptoNewsHntrs) September 9, 2025
Money market funds attracted investors during the Fed’s rate hike cycle, which pushed up yields to around 4.5%. These funds invest in high-quality, short-term debt instruments like Treasury bills and commercial paper. Retail money market funds hold $2.96 trillion while institutional funds contain $4.29 trillion.
Rate Cuts Could Trigger Capital Flight
David Duong, Institutional Head of Research at Coinbase, believes rate cuts will prompt investors to move cash into other assets. “There is over $7 trillion inside money market funds, and all of that is retail money,” Duong said. “As those rate cuts start to come in, all of that retail cash flow is really going to enter other asset classes such as equities, crypto and others.”
Traditional market strategists share this view. Cresset’s Chief Investment Strategist Jack Ablin noted that if money market yields drop from 4.5% to 4% or lower, investors may redeploy cash into stocks and other assets.
BitMEX co-founder Arthur Hayes predicts the Fed will cut rates by 50 basis points in September. He points to the sharp decline in the 2-year Treasury yield and weak labor data as evidence. Hayes expects this will drive millions or billions in capital inflows to crypto markets.
2YR points to 50bps cut by cuck Jaypow after weak NFP print. sUSDe yields 7%, get ready for trillions in MMF looking for better yields, #defi will get some of this cash searching for yield. $ENA > $1.50, $USDE supply >$20bn fuck you @circle we coming 4 u. pic.twitter.com/RZ8Qz1qVGJ
— Arthur Hayes (@CryptoHayes) September 8, 2025
DeFi Protocols Positioned to Benefit
Hayes specifically highlighted decentralized finance protocols as beneficiaries of the potential capital rotation. He noted that Ethena’s staked USDe offers a 7% yield, which could attract institutional money seeking better returns than traditional money markets.
The crypto entrepreneur predicts this inflow will boost Ethena’s synthetic dollar supply to over $20 billion from the current $12.98 billion. Hayes recently purchased 1.34 million ENA tokens for 1.02 million USDC, bringing his total holdings to 4.45 million ENA worth $3.48 million.
Economic Conditions Will Determine Flow
The rotation from money markets is not guaranteed and depends on broader economic conditions. If rate cuts occur during an economic slowdown, investors may prefer to keep money in safer assets despite lower yields.
Money market funds offer stable returns and immediate cash access, making them attractive during uncertain times. Pseudonymous observer EndGame Macro noted that similar buildups occurred after the dot-com crash, financial crisis, and in 2020-21 when investors wanted yield without taking duration or equity risk.
EndGame Macro explained that the size of the Fed’s rate cut matters. A cautious 25 basis point move would let money funds decline gradually, while a 50 basis point cut could accelerate the shift into Treasuries first and then riskier assets.
The CME FedWatch Tool shows an 88% probability of a 25 basis point rate cut this month. Traders expect 75 basis points of total cuts this year, with 70% odds of another 25 basis point reduction in December.
Hayes predicts ENA price will surpass $1.50 in the coming months, up from the current $0.792. The token gained over 4% in 24 hours with trading volume increasing 75%.
