Cathie Wood said the ongoing banking crisis is a total failure of US Fed policy and could have been avoided with crypto’s decentralized solutions.
ARK CEO blames Fed policy failure for banking crisis
Amid all the chaos surrounding multiple bank runs in the US, 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 blames the failure of companies such as Silicon Valley Bank (SVB) and Signature on the Fed’s policy failures.
Cryptocurrency prices skyrocketed by double digits. At the time of writing, Bitcoin is trading at $24,795 and Ether is trading at $1,660. These cryptocurrencies reached during the US banking crisis new multi-month highlights.
On Twitter, Wood criticized the Federal Reserve’s inability to avert bank runs despite all signs.
“I was stunned that banks and regulators couldn’t convince the Fed that disaster was imminent.”
She argued that Fed policy was the main culprit for the ongoing banking crisis due to a “drought” in venture capital funding.
She referred to the mismatch between assets and liabilities, which is typical for banks in most circumstances. However, it was unsustainable in the current scenario, with deposits leaving the banking system for the first time since the 1930s. Securities income for banks was only 1–2%, while deposits paid 3–5%. This eventually became unsustainable as deposits began to leave the system. Like SVB, some banks were forced to sell held-to-maturity securities. In doing so, they made losses that depleted their stock accounts.
Crypto as a scapegoat
Wood also reminded everyone that the ongoing crisis was not caused by cryptocurrency. Since the demise of FTX ecosystem, the ecosystem has come under heavy scrutiny. This in turn led to strict regulatory action. Wood said regulators are using crypto as a scapegoat for their own failings in overseeing traditional banking.
Wood has long been an outspoken advocate of crypto. This often manifests itself in her company’s investments in emerging markets, especially crypto. She noted that the current banking crisis would not have been possible in the decentralized, transparent, auditable and over-collateralized crypto asset ecosystem.
Wood projected crypto as a solution to the central points of failure, opacity, and regulatory flaws in the traditional financial system. As a scapegoat for policy mistakes, crypto will move outside the US, depriving the country of one of the most important innovations in history.