Analysts are asserting that the sheer magnitude of the United States stock market—valued at $75 trillion—provides policymakers a compelling justification to provide financial support during significant market declines, as it is currently deemed "too big and too important to fail." Consequently, this intervention by the US central bank to backstop the equity market during a bear market could introduce increased liquidity into crypto markets.

The American equity market has expanded by 68% over the last five years, accumulating approximately $6 trillion in market value this year alone. Despite this growth, certain experts, including known "goldbug" Peter Schiff, have cautioned that years of accelerating gains might be positioning the market for a substantial correction.

Eric Balchunas, Bloomberg's expert on Exchange Traded Funds (ETFs), suggested on Tuesday that such a correction could compel the Federal Reserve to "break decades of precedent" by purchasing equity ETFs to stabilize the stock market. Other analysts, however, proposed that this eventual move to boost liquidity would likely create conditions favorable for cryptocurrencies to gain ground.

Alvin Kan, Chief Operating Officer at Bitget Wallet, conveyed to Cointelegraph that once the Fed engages, history shows that periods involving rate cuts, balance-sheet expansion, or even specific ETF purchases correspond with the commencement of a medium-to-long-term uptrend for crypto. He likened this pattern to what was observed in 2021, coinciding with the return of risk appetite and capital flowing back into high-beta assets.

Balchunas further pointed out that since 58% of Americans hold stocks, the "political pressure to keep stocks out of a prolonged bear market is going to be very powerful."

A relevant precedent occurred in 2020 when the Fed acted as the "buyer of last resort" to revive credit markets paralyzed by COVID-19, purchasing corporate bond ETFs. This extraordinary action involved the Fed acquiring $8.7 billion worth of ETFs, which subsequently helped mitigate economic harm stemming from the pandemic.

Balchunas voiced his expectation that "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.” He added that the United States might follow the lead of central banks in China and Japan, which currently employ authorized intermediaries and public funds for indirect equity ETF purchases designed to enhance liquidity.

Tim Sun, a senior researcher at HashKey Group, cautioned that an extended, severe bear market would inflict damage beyond merely diminishing investor wealth. He stated it "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 clarified that while central banks will not directly support cryptocurrencies, "their macro pricing remains fundamentally tied to US dollar liquidity, real interest rates, and equity market risk sentiment.”

Kan concluded that this structural safety net fosters "a more resilient macro backdrop," which ultimately proves bullish for crypto's standing as an asset for growth and diversification within an environment of increasing global liquidity.

Conversely, Jeff Mei, operating chief at BTSE, noted to Cointelegraph that during a downturn, stimulating the economy through expanded money printing might prove difficult due to persistent high inflation. Nevertheless, he suggested that the Fed still possesses alternative instruments available to initiate action.