Cathie Wood, chief executive officer of asset management company ARK Invest, recently spoke on cryptocurrency’s role as a safe haven in the midst of the ongoing U.S. banking crisis. Wood blamed the downfall of Silicon Valley Bank and Signature Bank on Federal Reserve policy failures. The banking crisis caused cryptocurrency prices to soar by double digits, with Bitcoin and Ether both reaching new multimonth highs.
Wood criticized the Federal Reserve’s inability, despite many indicators being present, to prevent bank runs in a March 16th Twitter thread. She went on to state that she was “baffled” that U.S. regulators and financial institutions were unable to convince the Fed of the impending danger. Wood also claimed that the main culprit for the current banking crisis was Federal Reserve policy, which caused a venture capital funding deficit.
Wood pointed out the asset-to-liability imbalance, which, although common for most banks, was unsustainable in the present situation. She also mentioned that there were deposits exiting the U.S. banking network for the first time in over seventy years. Securities income for banks is only 1& to 2%, whereas deposits pay 3% to 5%.
This eventually becomes untenable when deposits start exiting the system. Similar to Silicon Valley Bank, some banks have been forced to sell off their held-to-maturity securities, taking on losses that exhausted their equity accounts.
Wood reminded everyone that cryptocurrency was not the cause of the current crisis. The ecosystem has been under intense scrutiny since FTX’s collapse, which led to a harsh regulatory crackdown. Wood stated that regulators are using cryptocurrency as a way to excuse their own lack of traditional banking oversight.
Wood is a long-standing cryptocurrency advocate. This fact is often evident in her company’s investments in emerging markets, particularly the digital asset market. Wood noted that the current crises would not be taking place in a decentralized cryptocurrency asset ecosystem that is overcollateralized, completely transparent, and open for audits.
Wood saw crypto as one solution for the primary failures, including the regulatory errors in today’s conventional financial system. Digital assets will be used as a scapegoat for policy errors, forcing crypto to move offshore and thus depriving the United States of one of history’s greatest innovations.