Cathie Wood, founder and CEO of ARK Invest, said more regional banks could fail if the ongoing US banking crisis is not resolved.
Wood reviewed the factors that led to the collapse of Silicon Valley Bank and Silvergate Bank over the weekend, noting that it is the Fed’s responsibility to fix the problem. She warned that focusing on lagging indicators such as CPI could steer the Fed away from the root cause of the problem — economic deflation caused by an inverted yield curve.
Letting more regional banks fail would further centralize the U.S. banking system, she said, adding that nationalizing the banking system is also a specious risk.
The collapse of three major banks focused on cryptocurrencies and technology further cemented Wood’s optimism on crypto.
She said neither she nor the rest of the team at ARK that oversees cryptocurrency investments have been surprised by the current cryptocurrency market rally.
Markets took a hit earlier in the week as rumors of a possible bankruptcy at Silvergate shook investor confidence. After falling below $20,000 and dragging the rest of the market, bitcoin was back above $22,000 as news about Signature Bank broke on Sunday night. Ethereum and other altcoin markets followed suit, posting anomalous returns following unprecedented market volatility.
According to Wood, bitcoin and ethereum rallied because the blockchain networks they are based on are decentralized, transparent and auditable.
“Banks are not, and over the past few days, have become less important,” she said. “Regulators have focused investors’ attention on the threat cryptocurrencies pose to users, but this weekend upended that theory.”
Cathie Wood’s confidence in the cryptocurrency market is also not surprising.
Wood is sticking with her investments throughout 2022, even after ARK suffered major losses on most of its cryptocurrency portfolio. The fund’s commitment to the sector appears to be getting buy-in from investors, who increased exposure to ARK’s ETF even as its risky tech portfolio collapsed.
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