- A 300bps rate drop could erase $233.7 billion in annual income from $7.79 trillion in money market funds.
- STRC’s 11.25% yield creates a 6.5-point gap over cash, making it a strong target for rotating institutional capital.
- Each $1B raised through STRC buys roughly 14,700 BTC, meaning large inflows could tighten Bitcoin supply significantly.
The $7.8 trillion amount that currently sits in U.S. money market funds faces significant problems related to interest rates. The Federal Reserve reductions of their discount window rates will continue to compress yields for many cash equivalent instruments.
As those returns shrink, institutional capital may rotate into higher-yielding alternatives. One such instrument, Strategy’s STRC preferred stock, could channel billions directly into Bitcoin purchases.
A $233 Billion Annual Income Loss Is Already Taking Shape
Money market funds currently hold $7.79 trillion in assets, as of February 18, 2026. These funds are yielding between 4.5% and 5% due to the previous rate-hiking cycle. A 300-basis-point decline would erase roughly $233.7 billion in annual income for holders.
The Fed has already moved 125 basis points into the current easing cycle. Markets are pricing in another 75 to 100 basis points before rates stabilize near 3%. That trajectory mirrors what happened during the post-2008 zero-rate era and again in 2020.
Pensions, insurers, and endowments cannot simply absorb that level of income loss. These institutions carry fixed return targets, often between 7% and 8% annually. When short-term rates fall, fund managers are obligated to search elsewhere for yield.
Rate Cuts Have Historically Redirected Trillions Into Higher-Yield Alternatives
Analyst Adam Livingston outlined the rotation dynamic on X, noting that “for every 100bps decline in short-term rates, alternative and high-yield vehicles see 10–20% accelerated inflows in the following 12–18 months.”
Post-2008 private debt AUM grew from $245 billion to over $1.7 trillion across roughly a decade. That growth was not coincidental — it tracked directly alongside falling benchmark rates.
During the 2020 COVID cutting cycle, prime money market funds shed $139 billion in March alone. Government money market funds absorbed much of that initially, but capital eventually rotated into alternatives once conditions stabilized.
High-yield bonds, private credit, and semiliquid fund structures all saw multi-hundred-billion inflows as a result.
Research firm Preqin projects private credit will reach $2.64 trillion by 2029 under base case conditions. Semiliquid and evergreen vehicles in the U.S. doubled to $204 billion in 2025.
Even a modest 5% rotation out of money market funds generates roughly $390 billion in fresh capital seeking yield.
STRC Is Structurally Positioned to Capture a Portion of That Rotation
Strategy’s STRC, a Variable Rate Series A Perpetual Preferred Stock, trades on Nasdaq near its $100 par value. It pays 11.25% annualized in monthly cash distributions, with a rules-based reset mechanism tied to par.
At current money market yields of 4.5%, the yield gap between STRC and cash sits above 6.5 percentage points.
The stock carries a notional value of $3.458 billion and averages $128 million in daily trading volume. Strategy holds over 717,000 Bitcoin alongside $2.25 billion in cash reserves.
Those reserves cover dividend obligations for more than two and a half years at a 5.6x overcollateralization ratio.
Livingston describes STRC as sitting at “the perfect nexus” because it offers liquidity, high yield, and structural stability.
Unlike private credit vehicles that lock up capital for years, STRC is exchange-listed and accessible to a broad institutional base. That combination makes it a practical landing spot for rotating yield-hungry capital.
Bitcoin Supply Could Tighten Sharply as STRC Scales With New Capital
Each $1 billion raised through STRC issuance translates to roughly 14,700 Bitcoin purchased at current prices near $68,000.
A conservative 0.5% rotation from money market funds into STRC alone would direct $2 to $4 billion into the stock. That would add between 29,000 and 58,800 Bitcoin to Strategy’s treasury in a single cycle.
A base case scenario, assuming 5% MMF rotation with 10% captured by liquid high-yield instruments, points to $39 billion flowing into the category.
At that scale, the Bitcoin purchases tied to STRC issuance would represent a meaningful share of annual supply.
Annual Bitcoin issuance currently runs near 164,000 coins — making a 58,000 to 80,000 BTC purchase equivalent to 35% to 49% of one full year of mining output.
If STRC scales toward $10 to $20 billion in notional value by 2028, as some projections suggest, the cumulative Bitcoin accumulation would grow substantially larger.
That volume would exceed anything the spot Bitcoin ETF launch produced in its early months. The yield cliff, in that scenario, does not just redirect cash — it tightens Bitcoin’s available supply in a measurable and sustained way.
Source: https://www.livebitcoinnews.com/7-8-trillion-yield-cliff-how-fed-rate-cuts-could-trigger-a-bitcoin-supply-shock/
