Monetary Policy

Cathie Wood thinks Bitcoin and Ether are acting as “risk-off” assets and as a “flight to safety” for investors amid macroeconomic uncertainty.

Recent turmoil in the banking sector has shown that Bitcoin (BTC) and Ether (ETH) can withstand a shaky economy, outperform other asset classes and function like gold, says ARK Invest chief executive Cathie Wood — though one long-time investor still isn’t sold.

Wood said in an April 15 interview that Bitcoin’s resilience throughout the most recent banking crisis has been “the most remarkable” of all indicators her tech-focused investment management firm is monitoring.

Bitcoin and Ether are now acting as “risk-off” assets and as a “flight to safety” for investors amid macroeconomic uncertainty, she claimed:

“They’re going to disrupt the traditional world order. What are Bitcoin and Ether doing? I mean by the very fact that they’re being considered flight to safety like gold, that’s really interesting and suggests much broader-based adoption and acceptance than I think most people understand.”

“We would say that there is a flight to safety, certainly led by crypto assets, and it is telling us that the world is transforming and will continue to transform. You cannot stop innovation,” she added.

Why have bitcoin and other crypto assets appreciated during this banking crisis? In our view and in contrast to those in the traditional financial world, many crypto assets face no central points of failure: they are decentralized, transparent, and auditable.

— Cathie Wood (@CathieDWood) March 23, 2023

Wood thinks cryptocurrency will eventually become an “election issue” when the sector becomes more broadly accepted and the public can more clearly see the kinds of regulatory pressures that the United States government are applying on the industry to maintain centralized control of money and monetary policy.

Not all share Wood’s sentiment.

Ray Dalio, the founder of Bridgewater Associates, the world’s largest hedge fund by assets under management, said in an April 12 interview that Bitcoin could not serve as an “effective currency” because it is too volatile and central banks won’t adopt it:

“Bitcoin is neither an effective store hold of wealth or a medium of exchange so it is not an effective currency. It has a volatility to it that has no relation to practically anything [...] it’s a very, very poor alternative to gold.”

“They can outlaw [Bitcoin]. They can regulate it. Central banks and countries pretty much don’t want it anyway,” he said, adding that it gets attention “way out of proportion” to its size.

Related: Bitcoin likely to outperform all crypto assets following banking crisis, analyst explains

Dalio strengthened his case by pointing out that gold is the third largest reserve held by central banks, trailing only the U.S. dollar and euros.

Despite previously describing Bitcoin as “one hell of an invention,” Dalio recently explained that he instead wants to see an “inflation-linked” coin be built that would serve to ensure consumers secure their buying power.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom