How Trends In AI, Automation And Emerging Tech Are Poised To Disrupt The 4.6 Trillion Money Markets Industry

Emerging Tech

As traditional money markets boom to record highs of 4.6 trillion dollars, it is clear investors are looking for safe returns during these times of economic uncertainty. New start-ups like are making waves by leveraging new technologies to disrupt one the largest and oldest sectors of finance.

In what feels like an infinite universe of thematic funds and obscure financial products, the biggest trend in 2020 is the record highs that the money market exchange-traded funds (ETFs) reached, exceeding $4.6 trillion USD—-all thanks to the power of AI and automation. ETFs are funds that have strict mandates that require them to maintain precise allocations of their capital across a range of predefined products. 

As the market prices the assets move, the ETF must rebalance allocations to remain within their mandates. This gets particularly tricky when the ETF capital amounts are varying widely from day to day. This is where AI and automation enables these funds to process thousands of transactions a day and actively rebalance as the market moves. This allows them to meet their mandate and manage large pools of capital at scale.

Money market ETFs provide safety to investors to preserve their capital in turbulent markets while still generating modest returns. It should be no surprise that as the pandemic loomed, global investors looked to derisk their portfolios and opted for money market ETFs to weather the economic uncertainty. In a similar spirit, many investors also opted to buy digital assets like Bitcoin which many experts believe functions as a hedge against possible inflation due to its hardcoded fixed supply.

It is here, at the intersection of AI, automation, and digital assets we find what has become the biggest trend in finance of 2020 — Automated money markets for digital assets. It’s the combination of these technologies that’s driving innovation and adoption of new FinTech startups like Aave, Compound Finance and now that are looking to disrupt the mainstay of modern finance, money markets.

Money markets are specifically attractive in uncertain times. Investors sprinted to money-market funds starting in early March 2020. Though initially spurred on by the warning of an economic recession, the deposits into money markets continued to climb throughout the coronavirus pandemic in 2020 as volatility ticked higher and experts continued to warn of a longer-than-expected recession. AI powers many modern money market funds. These are a type of mutual fund that invests in high-quality, short-term debt instruments, cash, and cash equivalents using AI traders, or also commonly called robo-traders. 

Though not quite as safe as cash, money market funds are considered extremely low-risk on the investment spectrum. Money market ETFs are one of the more commonly known killer app financial products for Artificial intelligence, but specifically, this one branch of AI has seen an upswing in new users as of late given the lingering economic recession. Money markets provide safety and preservation of capital in turbulent markets. 

Emerging Tech

The funds held in a money market generally invest in high-quality and very liquid short-term debt instruments such as U.S. Treasury bonds and commercial paper, which don’t usually provide significant income but are much more attractive than depositing funds into a low yield savings account. Historically AI has been the predominant technology powering traditional money markets.

While money market ETFs use artificial intelligence and automation to invest the majority of their funds in either cash equivalents or highly-rated securities with very short-term maturities, some may invest a portion of their assets in longer-term or lower-rated securities. There are several traditional money market ETFs powered by AI including iShares Short Treasury Bond ETF (SHV), iShares Short Maturity Bond ETF (NEAR), SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL), and Invesco Ultra Short Duration ETF (GSY) to name a few.

However, one major trend is emerging to enhance AI powered Money Markets and that’s decentralized money markets. Because the best technology always wins, traditional money markets are exploring combining AI and blockchain for a potent potential to meet investor behavior in 2020.

The onslaught of new users depositing funds into decentralized money markets may be proving that a decentralized approach is the next step in the evolution of money markets. The common Silicon Valley notion that best technology wins certainly could ring true as the combination of the most promising emerging technologies provides a particularly attractive growth opportunity. That combined with the financial market conditions like the recession will likely contribute to a continued increase in deposits to money markets in 2020 and beyond.

The total assets deposited in such funds reached $4.6 trillion recently, The Wall Street Journal reported, citing data from Refinitiv Lipper, that the total deposit value hasn’t been this high since 1992, when safe havens went to wait out the public health crisis back then. 

The inflows of deposits are sending mixed signals to experts. Money markets have more cash deployment power leaving room to expand into markets with a higher risk tolerance. However, from the investors’ perspective, the S&P 500 turned year-to-date positive just last week before plummeting on renewed coronavirus fears. While a few experts hypothesized that the index retraced its losses too quickly due to pandemic fears, others say that the economy is going to recover soon.

The cash-like assets trend spiked in February when markets first plummeted based on coronavirus fears. Investors poured into money-market funds while Treasurys dumped stock and corporate bond positions. Meanwhile, the Federal Reserve’s pivot into corporate credit markets set up protection for risk assets and contributed to their rebound in April and May of this year. 

While some investors are hoping for the economy to bounce back, others are preparing for the worst, but the growth of money markets continues because both types of investors find money markets attractive in uncertain times. With the increasing demand for money markets comes the demand for the technology powering them.

A new type of money market capable of addressing the whole $354B market launched today. offers money markets for Bitcoin and other assets. With the adoption of crypto on the rise, is the natural extension of the current financial system as more and more users demand the ability to lend, borrow, and earn with digital assets. 

The platform has a native asset as well with the asset ticker HARD (HARvest Decentralized) which gives anyone who holds the token a ratable voice in the decentralized platform’s on-going operations and evolution. “ uses a decentralized and open infrastructure allowing any person, business, or financial institution to access its money market products.

Harvest’s money market for Bitcoin and other assets comes at a critical time as several billionaire investors like Paul Tudor Jones along with several publicly traded companies like Square and Microstrategy have announced they have accumulated large sums of Bitcoin to augment their portfolios and corporate treasury returns. Harvest’s money markets are well timed to give these players even greater returns on their digital assets,” stated Brian Kerr, CEO and CoFounder of Kava, the decentralized platform upon which is built. 

AI based money markets used to offer that tech edge, and while AI funds still have appeal, it’s the extra yield delivered by blockchain technology efficiencies that’s likely driving the demand with users for these new products.

Though AI has traditionally been the trendy technology driving growth for money markets in 2019, yet 2020 marks the year where blockchain technology has outpaced AI as the top trend driving adoption. While blockchain has outpaced AI as the top trend in money markets, it’s unlikely that blockchain will outpace AI as a top trend across all financial services in 2020 or even 2021. AI is still very much the most trendy technology across the broader financial services industry.

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