If the US stock market takes a serious nosedive, the Federal Reserve might do something it’s never done before: buy equity ETFs. And that could be good news for crypto.
That’s the take from a handful of analysts watching the $75 trillion US equity market — up 68% in five years and looking wobbly. Some experts, including goldbug Peter Schiff, have warned that years of rapid growth have set the market up for a major correction.
Bloomberg’s ETF expert Eric Balchunas said Tuesday that a serious downturn could push the Fed to “break decades of precedent” and buy equity ETFs to prop things up. The reasoning? 58% of Americans own stocks. “The political pressure to keep stocks out of a prolonged bear market is going to be very powerful,” Balchunas noted.
It’s not unprecedented. In 2020, the Fed bought corporate bond ETFs during COVID, acting as a buyer of last resort. That $8.7 billion intervention helped keep credit markets from freezing entirely.
If the Fed does the same for equities, the liquidity injection could spill over into crypto. Bitget Wallet COO Alvin Kan said that when the Fed steps in with rate cuts and balance-sheet expansion, “crypto has historically entered a medium-to-long-term uptrend.”
HashKey Group’s Tim Sun agreed. Crypto won’t get direct Fed backing, he said, but its “macro pricing remains fundamentally tied to US dollar liquidity, real interest rates, and equity market risk sentiment.” If risk appetite returns, Bitcoin and other major cryptos stand to benefit.
Not everyone’s convinced. BTSE’s Jeff Mei pointed out that inflation is still running hot, making it hard to justify more money printing. Still, he said the Fed has other tools it can use.
The bottom line? If the Fed blinks, crypto might catch the tailwind.
