Cathy Wood said the ongoing banking crisis is a complete failure of Federal Reserve policy and could have been avoided by decentralized solutions for cryptocurrencies.
Amid the chaos surrounding multiple US banks, Cathy Wood, CEO of asset manager ARK Invest, said cryptocurrencies have acted as a safe haven amid the ongoing US banking crisis. She blamed the recent failures of banks such as Silicon Valley Bank (SVB) and the Fed’s policy failures.
Cryptocurrency prices rise in double digits, Bitcoin
It hit a multi-month high amid the US banking crisis.
In a March 16 Twitter thread, Wood criticized the Fed for its inability to avoid a bank run, despite all signs. She said she was “surprised by the inability of banks and regulators to convince the Fed that disaster is imminent”. She believes that the Federal Reserve’s policies are responsible for the ongoing banking crisis due to a lack of venture capital funds. The asset-liability mismatch, while characteristic of banks in most cases, is unsustainable in the current context, in which deposits have flowed out of the banking system for the first time since the 1930s. Banks earned only 1-2% on securities compared to 3-5% on deposits, which eventually became unsustainable as deposits began to flow out of the system. Like SVB, some banks were forced to sell held-to-maturity securities, recognizing losses in their equity accounts. Wood also reminded everyone that the ongoing crisis is not caused by cryptocurrencies, and since the FTX collapse, the ecosystem has come under intense scrutiny, leading to a heavy regulatory crackdown. Wood said regulators are using cryptocurrencies as scapegoats for their misregulation of traditional banking.
Wood has long been a well-known supporter of cryptocurrencies, often reflected in his firm’s investments in emerging markets — and cryptocurrencies in particular. She noted that the current banking crisis would not have been possible in a decentralized, transparent, auditable and over-collateralized cryptoasset ecosystem.
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Wood envisions cryptocurrencies as a solution to central failures, ambiguities and regulatory errors in the traditional financial system. As a scapegoat for policy mistakes, cryptocurrencies will be moved overseas, depriving the United States of one of history’s most important innovations.