Jaipur (CoinChapter.com) — The Dow Jones, S&P 500, and cryptocurrency markets are on a tear today. US benchmark stock indices have main maintained a rallying streak for almost a week now. Crypto markets have also appreciated almost 7% in the last 24 hours. But what’s the source of this liquidity that’s inducing rallies in both these markets?
US Short Term Interest Rates
The US Dollar printer is hard at work pumping trillions of promissory notes to keep the economy afloat. This has spurred short-term interest rates to dip below the line into the negative territory. Money market funds have taken a severe hit in the process and are struggling to “be profitable” for investors.
As per the latest report by Financial Times, these funds, which primarily invest in short-term government debt, have attracted hundreds of billions of dollars from investors in recent times. Now they are in the rut due to their inability to churn out positive returns.
If numbers are anything to go by, around $4 trillion worth of funds are lying in government money market funds.
Where’s all this money coming from? According to the report:
Some of these inflows stem from the banks which have been urging large corporate clients to direct cash into money market funds rather than deposit it in their accounts.
Peter Crane, the publisher of Crane Data, said that the average 7-day yield for the topmost government market funds has dropped to 0.02%. This is much below 2019’s yield level of 1.39%.
That’s Why Investors Are Looking For Greener Pastures In Stocks And Crypto
With the “returns repository” in government money market funds running dry and investors facing the brunt of short-term negative interest rates, stock and crypto markets have proven to be the only viable options to preserve wealth. Also, the economy is literally flooded with cash due to incessant stimulus moves by the US government.
Therefore, investors are plowing cash in their favorite equities. That is visible from how meme stocks such as AMC are shooting for the stars. The Dow Jones Industrial Average is up 9.13 points, and the S&P 500 is fighting well to stay afloat.
Investors have infused nearly $170 billion in bitcoin and several other cryptocurrencies in the digital asset space. Dogecoin (DOGE) has been the showstopper of today’s rally. Listing announcement on Coinbase Pro has brought back the craze around this Shiba Inu canine-themed meme cryptocurrency.
Binance Coin (BNB), crypto exchange heavyweight Binance’s native digital token, hasn’t stayed back either and is looking to close in on 20% gains by surging past the $400 level. ETH, DOT, and SOL jumped 8%, 20%, and 10% respectively.
THETA also remains bullish with 8% gains in the last 24 hours.