Crypto Could Gain if Fed Backstops US Stocks
SkimNews Take
This framing inverts crypto's original "independent of central banks" pitch — its upside now hinges on the same Fed liquidity spigots Bitcoin was designed to bypass, tying digital assets' recovery to traditional market bailouts rather than decoupling from them.
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- Analysts argue crypto markets could benefit from increased liquidity if the Federal Reserve steps in to backstop the $75 trillion US equity market during a bear market, since it is "too big and too important to fail."
- Eric Balchunas, Bloomberg's ETF expert, said the Fed could "break decades of precedent" by buying equity ETFs in the next major downturn — 58% of Americans own stocks, creating "very powerful" political pressure to prevent prolonged bear markets.
- The US equity market has grown 68% over the past five years and added roughly $6 trillion in market value so far in 2025, though critics including Peter Schiff warn the rapid growth sets up a major correction.
- Bitcoin has underperformed US stock markets this year, but HashKey Group's Tim Sun says crypto's macro pricing remains "fundamentally tied to US dollar liquidity, real interest rates, and equity market risk sentiment."
- Bitget Wallet COO Alvin Kan said once the Fed acts — through rate cuts, balance-sheet expansion, or targeted ETF purchases — crypto historically enters a medium-to-long-term uptrend, similar to 2021, as capital rotates into "high-beta assets."
- The Federal Reserve bought $8.7 billion in corporate bond ETFs during COVID-19 as a "buyer of last resort," a precedent Balchunas says will become "common practice" in future downturns.
- BTSE operating chief Jeff Mei cautioned that inflation remaining high makes it "difficult to see the Fed printing more money," though he noted other policy tools remain available to stimulate markets.
Why it matters: The $75 trillion US equity market's political weight — 58% of Americans own stocks — gives policymakers strong incentive to backstop any major drawdown. If the Fed follows China and Japan's model of indirect equity ETF purchases, expanded dollar liquidity could compress crypto's risk premium and trigger a medium-to-long-term uptrend analogous to 2021's bull run.
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