Critics of Bitcoin have only gained further ammunition with the conclusion of Sam Bankman-Fried’s fraud case—but Cathie Wood is standing by the asset.
For the past couple of years the CEO of Ark Invest has maintained that prices will begin to fall—or deflate—thanks to emerging technologies such as AI and blockchain.
Despite some current evidence to the contrary—the Fed has been waging a war to bring inflation down since March 2022—Wood said: “We’re going to see deflation before all of this is over, and we’re beginning to see it already.
“We think this period of time is much more like the 19-teens than the 1970s.”
The decade of high inflation in the latter part of the 20th century has drawn comparisons to the current climate, with Deutsche Bank saying it is seeing a “striking number of parallels” between the two.
Yet irrespective of inflation or deflation, Wood’s long term priorities remained focussed on Bitcoin—which she believes will weather either storm.
When asked whether she’d choose to hold gold, cash or Bitcoin over the next 10 years on Bloomberg’s Merryn Talks Moneypodcast, Wood responded: “Bitcoin, hands down. Bitcoin is a hedge against both inflation and deflation—so is gold—but Bitcoin is digital … gold already has its demand, it’s happened, Bitcoin is new.
“Institutions are barely involved and young people would much prefer to hold Bitcoin than to hold gold.”
She acknowledged that both gold and Bitcoin are hedges against deflation but said the cryptocurrency has been performing better recently.
The asset, which Wood describes as “digital gold” is sitting at more than $34,000 at the time of writing. That’s down from in excess of $64,000 in late 2021.
ARK said the asset will be worth $1.48 million by 2030 in a report published earlier this year, representing a more than 4,252% increase from its current price.
Wood pushed back on the assumption that the current rise in the price of Bitcoin is because buyers are trying to hedge against inflation, saying the asset protects just as well against deflation.
“I don’t believe that inflation is why it’s going up,” Wood said. “There’s no counterparty risk in Bitcoin, it’s a completely transparent, decentralized network you can see everything that’s going on on the network.
“You cannot see what’s going on inside regional banks, you can only surmise because they’re losing deposits and they have to fund those by selling securities.”
The emptying Bitcoin train
Those flying the flag for coins may be somewhat subdued after the so-called ‘crypto king,’ Sam Bankman Fried, was found guilty of seven counts on Thursday, the culmination of a year-long criminal proceeding following the November 2022 collapse of the crypto exchange FTX.
“Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history—a multibillion-dollar scheme designed to make him the king of crypto,” U.S. Attorney Damian Williams said at a Thursday night press conference. “But here’s the thing: The cryptocurrency industry might be new, the players like Sam Bankman-Fried might be new, but this kind of fraud, this kind of corruption, is as old as time. And we have no patience for it.”
The culmination of the month-long trial may be the latest news in the crypto world, but fears over the market’s legitimacy have been long-held by legendary investors.
Warren Buffett famously said he wouldn’t take “all the Bitcoin in the world”—currently worth around $670 billion—for $25.
“What would I do with it?” Buffett asked. “I have to sell it back to you, one way or another. It isn’t going to do anything.”
Meanwhile JPMorgan Chase CEO Jamie Dimon agrees with Wood that blockchain is a “deployable” technology, but says Bitcoin is a “hyped-up fraud.”
“I think all that’s been a waste of time and why you guys waste any breath on it is totally beyond me,” he told CNBC last year. “Bitcoin itself is a hyped up fraud. It’s a pet rock.”
This type of resounding criticism has also been issued by Microsoft co-founder Bill Gates. While his adversary—and the richest man on earth—Elon Musk is a fan of cryptocurrencies, Gates is underwhelmed.
Cryptocurrencies are “100% based on greater fool theory” Gates said last year, adding: “I’m used to asset classes … like a farm where they have output, or like a company where they make products.”