Money Market Funds’ Popularity Surged in 2023 🔥

🐺 Hi pack-mates,

This is Howling Markets, the New Year’s Eve fireworks coloring the darkness of the night and wishing you good luck on your trades!

Today we will be covering:

• Education: What Is a Money Market Fund? 💰

• Tron’s Exceptional 2023 Performance 🎯

• Money Market Funds’ Popularity Surged in 2023 🔥

• Equity and Debt Markets Daily Update ⚖️

• And more!

Market Watch 👀

What Is a Money Market Fund?

A money market fund is a particular type of mutual fund that invests in the money market. Well, at this point you might ask “what is a mutual fund?” and “what is the money market?”, so let me clarify this definition a little more.

A mutual fund is a pooled investment vehicle controlled by a money manager which allocates the resources to various investment opportunities. By investing in a mutual fund, you will be able to earn from a diversified portfolio managed by an expert only by paying the fees and commissions to the money manager.

The money market, instead, is a subset of the debt market where short-term debt securities are traded. With “short-term” securities we mean assets with a maturity shorter than one year, such as overnight deposits, commercial papers, certificates of deposits, treasury bills and even central bank reserves!

As a matter of fact, it is important to note that the interbank market we talked about in relation to the monetary policy rates is simply a subset of the money market where the commercial banks and the central bank can borrow and lend reserves.

However, in the interbank market only commercial banks can enter, so even if you participate in the money market you will not be able to borrow any central bank reserves!

In conclusion, a money market fund is a special type of mutual fund that invests their assets under management in the short-term debt securities traded in the money market.

Tron’s Exceptional 2023 Performance

In previous newsletters we have discussed the exceptional performances of Solana, Avalanche, Bitcoin and many other cryptocurrencies, but we have never talked about Tron.

Tron is a decentralized blockchain-based operating system with smart contract functionality, extremely popular in the field of decentralized finance (DeFi). Together with the operating system, it was also created a native cryptocurrency called Tronix (Ticker: TRX).

The Tron ecosystem was created in 2017, and it originally was a simple token based on the Ethereum blockchain, but since 2018 it switched its protocol to its own blockchain.

Once this change occurred, it started to gain a lot of popularity and Tronix is currently up almost 1,300% since its all-time low.

One of the main reasons why Tron is so popular is its relationship with USDT, the US dollar Tether stablecoin. In 2023, Tron became the largest USDT blockchain, housing more than 50% of the stablecoin’s total supply for a total value of almost $49 billion.

Do you believe that this exceptional network will continue to grow throughout 2024 or do you think that the competition will become too fierce?

Today’s Howling Question

And now, it is time for our howling question!

We have discussed how Tron had a good year when it comes to popularity and applications, but how well did its token perform?

a)  -21%

b)  Around 0%

c) 33%

d)  62%

e)  97%

Try to answer the question by yourself, and then check the correct answer after the last interesting news!

Money Market Funds’ Popularity Surged in 2023

As we know, monetary policies around the world have been one of the most determinant factors in 2023. From the possibility of accessing loans to return on investments central banks have an extremely powerful impact on our economy.

Throughout 2023 most central banks around the world increased their interest rates with the intent of slowing down the economy avoiding inflation getting out of control.

Such a policy caused a slowdown in investments, and therefore in returns, inducing a suboptimal performance of the stock market. Only when the markets started to believe that a Fed pivot was near, the market rallied almost 25% from their lows!

However, this high interest rate enviroment attracted many investors to the money markets where they would have been able to earn an exceptional 5% risk free interest rate.

Such offering quickly became impossible to pass and in 2023 the collective Asset Under Management (AUM) of the US money market funds rose by $1.17 trillion, a record 22.5% increase with respect to 2022.

Thanks to this increase, the combined AUM reached $6.35 trillion allowing US money market fund providers to earn a combined $7.6 billion in fees, 15% more than in 2022.

Additionally, despite the fact that policy rates are forecasted to drop next year, many experts believe that the capital inflows in the money market will continue throughout 2024.

What do you think will be the evolution of the money market in 2024?

Equity and Debt Markets Update ⚖️

And now, our daily markets update!

And now, our daily markets update!

During the last trading day of the year, Friday the 29^th of December, the S&P500 finally slipped down by -0.28% after several days in a row characterized by a decline in strength.

However, by taking a closer look at the chart, it is possible to notice that the candle has a quite long tail, indicating that the price faced substantial selling pressure during the day, but at the end of it, there was enough demand to absorb the selling orders.

Considering SPX’s performance, the debt markets behaved exactly as expected: similar returns but in the opposite direction.

The 10 year US government bond yields gained +0.57%, however, also in this case there is the presence of a long wig, this time pointing to the upside. This candle shape indicates that there has been a strong buying pressure throughout the day, but there were enough sellers to keep the yield relatively low.

Answer

The correct answer is e) 97%.

More specifically, the price increased by 97.08% between the closing prices of the 31^st of December 2022 and of the 31^st of December 2023.

These returns are more or less similar to Ethereum’s and slightly lower than other coins’ returns that we have praised in past newsletters.

However, this “lower” returns can be explained by the fact that the Total Value Locked (TVL) has increased from 30 million TRX to 76 billion TRX, depreciating the value of the token. So, considering this, a 97% return is quite impressive.

Howl-Worthy Memes 😂

🐺 See you next time!

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