Cathie Wood, the founder of ARK Invest, an American investment management firm that invests in disruptive technologies, including exposure to cryptocurrencies, thinks the current banking crisis in the United States was inevitable.
The U.S. Banking Crisis Was Coming: ARK Invest Founder
In a tweet on March 14, Wood said the banking crisis was looming in plain sight and is blaming regulators for not taking timely steps to avert the problem.
While the US banking system was seizing up in response to bank runs threatening regional banks, Bitcoin, Ethereum, and other crypto networks didn’t skip a beat. Instability in the banking system threatened stablecoins, the on-ramps to DeFi, in stark contrast to regulator rhetoric
— Cathie Wood (@CathieDWood)
In her assessment, regulators, including the United States Securities and Exchange Commission (SEC) and the rest, should block the proliferation of centralized finance (CeFi) platforms which she says are opaque.
Moreover, the founder pointed out what she said were “assets and liability duration mismatches” that made banks distressed, especially as deposits ran low. In her view, bank deposits have been decreasing on a year-on-year basis for the first time in over a decade. With this combination, Wood thinks it was hard for the Federal Reserve and government to prevent a crisis from happening.
“They should have been all over the crisis that was looming in plain sight: asset and liability duration mismatches as short rates soared 19-fold in less than a year and deposits in the banking system were falling on a year-over-year basis for the first time since the 1920s!” the founder said.
Bitcoin And Crypto Rally
At the heart of DeFi and crypto are stablecoins like USDC, the fiat-backed token issued by Circle, USDT issued by Tether Holdings, and DAI, an algorithmic stablecoin. All of them are central to the industry, acting as conduits of capital from traditional finance to the broader crypto ecosystem.
Cathie Wood said even as the government and the Federal Reserve scrambled to stem a banking collapse, decentralized networks like Bitcoin and Ethereum operated as usual. For the past five trading days, Bitcoin prices, for instance, have been on an uptrend, reaching as high as $26,300 on March 14, printing a new Q1 2023 high. Ethereum also remains firm, recovering from last week’s losses.
Since the banking chaos began, only USDC by Circle was temporarily impacted following their exposure to Silicon Valley Bank (SVB). Last week, the regional bank was placed under receivership by California authorities. Although USDC de-pegged, it is currently trading at parity with the USD.
Despite the banking crisis being a boon for Bitcoin and other cryptocurrencies, the events of the past six months have been distressing for coin holders.
In November, following the collapse of FTX, a cryptocurrency exchange, Bitcoin crashed to register new 2022, falling to as low as $15,300. The DeFi and non-fungible token (NFT) ecosystems also contracted as activity dropped. However, in a in early February, ARK Invest said Bitcoin would soar to as high as $1.48 million in seven years.