Amid the ongoing banking crisis in the United States, cryptocurrencies have become a safe haven, according to Cathie Wood, CEO of asset management firm ARK Invest. Wood criticized the Federal Reserve’s inability to prevent bank runs and blamed its failed policy for the current crisis, which has led to the collapse of banks including Silicon Valley Bank (SVB) and Signature.
In a March 16 Twitter thread, Wood pointed to the asset-liability mismatch, which is typical for banks but was unsustainable in the current scenario. Deposits were leaving the banking system for the first time since the 1930s, and securities gains for banks were only 1-2% versus deposits paying 3-5%, which eventually became unsustainable. when deposits began to leave the system. Some banks were forced to sell held-to-maturity securities, recognizing losses that depleted their capital accounts.
Wood argued that the ongoing crisis was not forced by cryptocurrency, as the ecosystem has been under intense scrutiny since the FTX crash, leading to a severe regulatory crackdown. He said that regulators are using cryptocurrencies as a scapegoat for their own mistakes in overseeing traditional banking.
Wood has long been a well-known cryptocurrency advocate, which is often reflected in her company’s investment in emerging markets, especially cryptocurrencies. She envisioned cryptocurrencies as a solution to central points of failure, opacity, and regulatory failures in the traditional financial system. As a scapegoat for policy mistakes, cryptocurrencies will move abroad, depriving the US of one of the most important innovations in history.
The current banking crisis would not have been possible in the decentralized, transparent, auditable and overcollateralized ecosystem of crypto assets, according to Wood. Cryptocurrencies have proven to be a safe haven amid the US banking crisis, with Bitcoin and Ether hitting new multi-month highs. As traditional banking continues to struggle, it is clear that cryptocurrencies will play an increasingly important role in the financial landscape of the future.