An analysis said that if U.S. stocks enter a steep bear market, Federal Reserve support for markets could expand liquidity in cryptocurrency markets.

Cointelegraph, a blockchain media outlet, reported on July 9 that analysts see the $75 trillion U.S. stock market as too large and important to leave unattended in a sharp decline.

U.S. stocks have grown 68 percent over the past 5 years, and market capitalisation has increased by about $6 trillion this year alone. Peter Schiff and others have warned that such a sharp rise could lead to a large-scale correction. Eric Balchunas said that if such a correction comes, the Fed could buy equity ETFs, breaking with decades of precedent.

Balchunas said 58 percent of Americans own stocks, creating very strong political pressure to prevent a prolonged bear market. He added that in the next major downturn, the Fed is likely to buy equity ETFs to support markets, and such steps could become more common in the future.

Alvin Kan (앨빈 칸), chief operating officer of Bitget Wallet, said that if the Fed intervenes, it could be followed by rate cuts, balance-sheet expansion and purchases of specific ETFs. He said cryptocurrencies could enter a medium- to long-term uptrend similar to 2021 as risk appetite revives and funds move into high-volatility assets.

Tim Sun (팀 선), senior researcher at Hashkey Group, said a prolonged and severe bear market could hit consumer spending, pension stability, corporate credit expansion and tax revenues, beyond reducing investor assets. He said cryptocurrencies are not a direct target of central bank support, but their prices are linked to dollar liquidity, real interest rates and stock market risk sentiment.

The Fed bought corporate bond ETFs during the 2020 COVID-19 period to restore liquidity in frozen credit markets, purchasing $8.7 billion worth. Balchunas said that the central banks of China and Japan are indirectly buying equity ETFs through approved brokers using public funds, and the United States could follow a similar approach.

Jeff Mei (제프 메이), chief operating officer of BTSE, said that with inflation still high, it would not be easy for the Fed to immediately move to provide additional liquidity even if the economy declines. He left open the possibility that the Fed could use other means.