Crypto could benefit if Fed backstops US stocks: Analysts

Crypto could benefit if the Fed steps in to backstop the US stock market during a major downturn, analysts say. Rate cuts, balance-sheet expansion and even targeted equity ETF purchases would add dollar liquidity, lift risk appetite and historically have sent capital back into high-beta assets like Bitcoin. The thesis lands as Bitcoin retests $60,000 support and onchain equity flows accelerate.

Key Takeaways

• Bitget Wallet COO Alvin Kan and HashKey researcher Tim Sun argue Fed intervention to support the roughly $75 trillion US equity market could be bullish for crypto.
• Bloomberg ETF analyst Eric Balchunas says the Fed could break precedent by buying equity ETFs in the next major downturn.
• Bitcoin fell about 3.5% as Brent crude neared $74, Japan bond yields hit 30-year highs and Strategy sold roughly $216 million of BTC.
• Tokenized stock transfers jumped 105% in a month to $8.41 billion, with distributed value climbing to $2.16 billion, per RWA.xyz data.
• Crypto would not receive direct Fed backing, but pricing remains tied to dollar liquidity and equity risk sentiment.

Why would crypto benefit if the Fed backstops stocks?

Analysts point to a liquidity chain. The US stock market is widely described as too big and too important for policymakers to let a severe bear market run unchallenged.

Alvin Kan, chief operating officer at Bitget Wallet, told Cointelegraph that the market's size and scope "gives policymakers a strong incentive to backstop major drawdowns."

Once intervention begins, Kan said, "rate cuts, balance-sheet expansion, even targeted ETF purchases" have historically pushed crypto into medium-to-long-term uptrends, similar to 2021, as capital rotates into high-beta assets.

HashKey Group senior researcher Tim Sun added that while cryptocurrencies would not receive direct central-bank support, their macro pricing remains tied to US dollar liquidity, real interest rates and equity-market risk sentiment.

Could the Fed really buy stock ETFs?

The idea is gaining attention. Bloomberg ETF analyst Eric Balchunas said on Tuesday that a deep equity correction could see the Fed "break decades of precedent" and purchase equity ETFs to stabilize markets.

Balchunas said he sees "a good chance" the Fed will buy equity ETFs in the next major downturn, and that such action could become common practice.

Sun argued that if market participants believe a policy floor underpins risk assets, the risk premium on volatile assets could compress—potentially benefiting Bitcoin and mainstream crypto.

Kan framed that structural backstop as supportive for crypto's role as a growth and diversification asset in a world of expanding global liquidity.

What headwinds is Bitcoin facing near $60K?

The Fed-backstop thesis is playing out against a weaker near-term tape. Bitcoin traded down about 3.5% on Wednesday as it retested the key $60,000 support zone.

Brent crude climbed toward $74 from about $68 the prior week after the US-Iran memorandum of understanding broke down, raising inflation concerns and reducing odds of near-term Fed rate cuts.

In Japan, 10-year government bond yields reached a 30-year high amid fears about central-bank independence, with contagion risk elevated because Japan is the largest foreign holder of US Treasuries.

Strategy (MSTR) also disclosed roughly $216 million in bitcoin sales outside its core $1.25 billion monetization program, adding supply-side pressure that traders are watching closely.

How does tokenized equity growth fit the picture?

At the same time, the bridge between stocks and crypto rails is accelerating. Tokenized stock transfers more than doubled over the past month to $8.41 billion, up 105%, according to RWA.xyz data cited by Cointelegraph.

Sector distributed value climbed 43% to $2.16 billion, while holders rose 17% to more than 409,000 as crypto firms and traditional institutions expand tokenized equity initiatives.

Figure's distributed value surged 935% over 30 days, Securitize rose 332% and xStocks gained about 62%. The tokenized stock market has grown from roughly $378 million to $2.16 billion over the past year.

For more on how macro policy and onchain markets intersect, see our Fintech & Crypto Alerts coverage.