Cathie Wood, the founder and CEO of Ark Invest, a prominent investment management company, believes that Bitcoin (BTC) functions as a protective asset for individuals living under unstable regimes or experiencing currency devaluation, as more people turn to it as a form of financial security.

In an interview with CNBC, Wood expressed his view that Bitcoin functions as a safeguard against inflation and value erosion. He emphasized that its widespread usage indicates a trend towards securing wealth in this digital currency, reflecting a search for security in diverse regions around the world.

An Insurance Policy Against Rogue Regimes

In recent times, various fiat currencies have weakened versus the US dollar due to persistent inflation challenges in different countries. For instance, the Nigerian naira has experienced a significant loss of over 50% in value, while the Egyptian pound has depreciated by approximately 40%.

Among other currencies are the Argentine peso, Japanese yen, Turkish lira, Lebanese pound, and Pakistani Rupee. The significant decline of these currencies led Bitcoin to reach record-breaking prices against them prior to hitting a new mark versus the US dollar.

According to Wood’s perspective, the significant increase in Bitcoin’s value over the past few weeks can be attributed to the currency devaluations and investments flowing into the spot Bitcoin ETF market. People viewed Bitcoin as a protective asset against unwelcome monetary policies and opted to keep their funds in it.

“In my opinion, this is a protective measure being taken. It serves as a safeguard against currency devaluation and potential loss of buying power and wealth. I view it as an investment in security – against unpredictable regimes or poor fiscal and monetary policies.”

No Counterparty Risk

During the financial crisis in March 2023 when several regional banks failed, Bitcoin experienced a significant increase in value, rising approximately 40%. Wood emphasized that this wasn’t the first time Bitcoin had shown such a surge during a traditional financial turmoil.

Last year between March and April, approximately four US banking institutions, such as Silvergate and Signature Bank, had to close down due to massive withdrawals of deposits, leading to a bank run. Consequently, the stocks of these financial institutions took a significant hit. However, contrary to expectations, Bitcoin experienced notable growth during this period when the crypto market was enduring the bear cycle’s hardships.

Ark Invest’s CEO pointed out that this event underscores Bitcoin’s lack of counterparty risk and its role as an asset with elements of risk-on (during market upswings) and risk-off (during market downturns) characteristics.

Read More

2024-04-04 09:08