In the midst of all the chaos surrounding the multiple bank failures in the United States, Cathie Wood, CEO of asset management firm ARK Invest, stated that cryptocurrencies act as a safe haven amid the ongoing banking crisis in the United States. She blamed the recent decline of banks like Silicon Valley Bank (SVB), Signature and others on the failure of Federal Reserve policy.
Cryptocurrency prices shot up in double digits: Bitcoin (BTC) and Ether (ETH) hit new multi-month highs amid the US banking crisis.
In a Twitter thread on March 16, Wood criticized the Federal Reserve’s inability to prevent bank runs despite all the indications that existed. She said she was “baffled that banks and regulators couldn’t convince the Fed that disaster was coming.” He argued that Federal Reserve policy was the main culprit in the current banking crisis due to the VC funding drought.
Crypto did not force SVB and Signature into bankruptcy. In my view, Fed policy was the primary culprit. Because of a VC funding drought and higher yields on money market funds, deposits left the US banking system.
—Cathie Wood (@CathieDWood) March 16, 2023
Cryptocurrencies did not force the bankruptcy of SVB and Signature. I think Federal Reserve policy was the main culprit. Due to the VC funding drought and higher returns from money market funds, deposits left the US banking system.
He pointed to the mismatch between assets and liabilities, which, while typical in most circumstances for banks, was unsustainable in the current scenario; deposits left the banking system for the first time since the 1930s. Banks’ gains on securities were only 1-2% against deposits paying 3-5%, which eventually became unsustainable when deposits began to leave the system. Like SVB, some banks were forced to sell held-to-maturity securities, recognizing losses that depleted their capital accounts.
Wood also reminded everyone that the current crisis was not forced by cryptocurrencies, as the ecosystem has come under heavy scrutiny since the FTX crash, leading to a severe regulatory crackdown. Wood claimed that regulators are using cryptocurrencies as a scapegoat for their own failures to supervise traditional banking.
If you are correct, Congressman, then the FDIC and others will prevent the US from participating in the most important phase of the internet revolution. Like you, I believe regulators are using crypto as a scapegoat for their own lapses in oversight of traditional banking. https://t.co/UDh3bwB2pB
—Cathie Wood (@CathieDWood) March 16, 2023
If you’re right, Congressman, then the FDIC and others will keep America from participating in the most important phase of the Internet revolution. Like you, I believe that regulators are using crypto as a scapegoat for their own failures to oversee 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. He noted that the current banking crisis would not have been possible in the decentralized, transparent, auditable and overcollateralized ecosystem of crypto assets.
Wood envisioned cryptocurrencies as a solution to the core points of failure, opacity, and regulatory failures of the traditional financial system. As a scapegoat for political mistakes, cryptocurrencies will move abroad, depriving the United States of one of the most important innovations in history.
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