Amid all the chaos around multiple bank runs in the United States, Cathie Wood, CEO of asset management firm ARK Invest, said cryptocurrencies acted as a safe haven amid the ongoing banking crisis in the United States. She blamed the recent downfall of the likes of Silicon Valley Bank (SVB), Signature and others on the Fed’s policy failure.
Cryptocurrency prices shot up in double digits, with Bitcoin (BTC) and Ether (ETH) touching new multimonth highs amid the U.S. banking crisis.
In a Twitter thread on March 16, Wood criticized the Federal Reserve’s inability to avert bank runs despite all the signs being there. She said she was “baffled that banks and regulators could not convince the Fed that disaster loomed.” She argued that the Fed policy was the primary culprit for the ongoing banking crisis due to a venture capital 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
Pointing toward the asset-to-liability mismatch, which, although typical in most circumstances for banks, was untenable in the current scenario, with deposits leaving the banking system for the first time since the 1930s. Securities earnings for banks were only 1–2% against deposits paying 3–5%, which eventually became untenable as deposits started leaving the system. Like SVB, some banks were forced to sell held-to-maturity securities, recognizing losses that depleted their equity accounts.
Wood also reminded everyone that the ongoing crisis wasn’t forced by cryptocurrency, with the ecosystem under heavy scrutiny since FTX’s downfall, leading to a severe regulatory crackdown. Wood said that regulators are using crypto as a scapegoat for their own lapses in oversight of 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
Wood has long been a known crypto proponent, often reflected in her company’s investment in emerging markets — especially crypto. She noted that the current banking crisis would not have been possible in the decentralized, transparent, auditable and overcollateralized crypto asset ecosystem.
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Wood projected crypto as a solution to the central points of failure, the opacity and the regulatory mistakes in the traditional financial system. As the scapegoat for policy mistakes, crypto will move offshore, depriving the U.S. of one of the most important innovations in history.