Fed's ETF shopping spree could mean a $BTC aisle next 📈

Crypto markets could receive a tailwind if the US central bank intervenes to support the $75 trillion equity market during a downturn, according to analysts, who argue the market is "too big and too important to fail." The US equity market has expanded 68% over the past five years and added roughly $6 trillion in market value so far this year, even as analysts and figures such as goldbug Peter Schiff warn that the rapid growth could be setting the stage for a major correction.

Bloomberg ETF analyst Eric Balchunas said on Tuesday that such a correction could push the Federal Reserve to "break decades of precedent" and buy equity ETFs to backstop the stock market. Other analysts said the accompanying increase in liquidity could create conditions favorable to digital assets. "Once the Fed steps in, rate cuts, balance-sheet expansion, even targeted ETF purchases, crypto has historically entered a medium-to-long-term uptrend, similar to what we saw in 2021, as risk appetite returns and capital rotates back into high-beta assets," Bitget Wallet chief operating officer Alvin Kan told Cointelegraph. Balchunas noted that 58% of Americans own stocks, adding that "the political pressure to keep stocks out of a prolonged bear market is going to be very powerful."

The Fed previously intervened in equity-adjacent markets during the COVID-19 shock of 2020, purchasing $8.7 billion of corporate bond ETFs to act as a "buyer of last resort" and restore liquidity to frozen credit markets. "I think there's a good chance the Fed will buy equity ETFs in the next major downturn to support [the] market, and it will be common practice going forward," Balchunas said. He added that central banks in China and Japan already use indirect equity ETF purchases through authorized intermediaries with public funds to boost liquidity, a model the US could adopt. "This is just one byproduct of the 'Nothing Stops This Train' monetary supply explosion and debt extravaganza sweeping the world, but especially in the US, which at this point feels irreversible," he said.

HashKey Group senior researcher Tim Sun said a prolonged, severe bear market "would do far more than just erode investor wealth — it would directly shock consumer spending, compromise pension stability, stall corporate credit expansion, and dent tax revenues." Sun added that while cryptocurrencies will not receive direct backing from the central bank, "their macro pricing remains fundamentally tied to US dollar liquidity, real interest rates, and equity market risk sentiment." US stock market cap growth over the past five years was measured by the Wilshire 5000 Total Market Index, according to Yahoo Finance data cited in the report.