- The US equity market, now worth $75 trillion, is considered “too big to fail,” potentially prompting Fed intervention during a downturn.
- Analysts predict the Fed could buy equity ETFs to backstop stocks, breaking decades of precedent to support a market deeply embedded in American households.
- Increased liquidity from such intervention could create a bullish environment for crypto, historically entering uptrends as risk appetite returns.
- Crypto’s macro pricing remains tied to US dollar liquidity and equity sentiment, meaning a policy floor for stocks could compress risk premiums for digital assets.
The $75 trillion US equity market, which has grown by 68% over five years and added roughly $6 trillion in value this year, could prompt Federal Reserve intervention if a bear market strikes. Analysts warn the market is now considered “too big and too important to fail,” according to experts cited in the report.
However, goldbug Peter Schiff has cautioned that years of rapid growth could set the stage for a major correction. Bloomberg ETF expert Eric Balchunas said the Fed might “break decades of precedent” by buying equity ETFs, given that 58% of Americans own stocks.
Consequently, analysts noted that a Fed move to increase liquidity could benefit crypto markets. Bitget Wallet COO Alvin Kan explained: “Once the Fed steps in, rate cuts, balance-sheet expansion, even targeted ETF purchases, crypto has historically entered a medium-to-long-term uptrend.” He compared this to 2021, when risk appetite returned and capital rotated into high-beta assets.
Meanwhile, HashKey Group senior researcher Tim Sun argued that a severe bear market would shock consumer spending and pension stability. He stated: “Their macro pricing remains fundamentally tied to US dollar liquidity, real interest rates, and equity market risk sentiment.” Sun added that once a policy floor underpins risk assets, “Bitcoin and mainstream crypto assets are poised to benefit significantly from improving liquidity expectations.”
Balchunas pointed out that central banks in China and Japan already use indirect equity ETF purchases, calling this a byproduct of the “monetary supply explosion and debt extravaganza.” He said: “I think there’s a good chance the Fed will buy equity ETFs in the next major downturn.”
BTSE operating chief Jeff Mei noted that high inflation makes it difficult to see the Fed simply printing money, but other tools remain available. Kan concluded that this structural backstop supports a resilient macro backdrop, which “is ultimately bullish for crypto’s role as a growth and diversification asset.”
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