Ark Invest CEO Cathie Wood believes that Bitcoin is serving as a valuable tool for individuals in countries with high inflation rates and unstable currencies. She notes that lesser-discussed currency devaluations in countries like Nigeria, Egypt, and Argentina are contributing to Bitcoin’s rally this year, as people are turning to the cryptocurrency as a hedge against devaluation and loss of purchasing power. Wood argues that the recent surge in Bitcoin price is driven by a flight to safety, contrary to analysts who credit the launch of Bitcoin spot ETFs for the rally.
The price of Bitcoin has increased by 50% year to date, reaching a new all-time high above $73,000. Wood’s perspective on Bitcoin as an inflation hedge asset differs from that of most analysts, who view it as a product of the accessibility of Bitcoin spot ETFs to Wall Street investors. Despite this, Bitcoin’s appeal as a hedge against inflation is widely recognized within U.S. borders, with figures like BlackRock CEO Larry Fink referring to Bitcoin as “digital gold” and a hedge against economic uncertainty.
Wood explained Ark’s attraction to Bitcoin, citing the March 2023 banking crisis that led to a 40% increase in Bitcoin’s price as a government bailout of depositors was announced. Ark’s Bitcoin ETF, ARKB, currently holds around $3 billion worth of Bitcoin for clients, although the fund recently experienced its first net outflows since launch. Wood emphasized that Bitcoin offers the advantage of being free from counterparty risk, making it both a risk-on and risk-off asset that can serve as insurance against poor fiscal and monetary policies employed by certain governments.
Ark Invest initially invested in Bitcoin when it was priced at $250, driven by concerns surrounding the Greek debt crisis and the potential reintroduction of the drachma as the country’s currency. Wood views Bitcoin as an insurance policy against rogue regimes and fiscal mismanagement, highlighting its potential value in times of economic uncertainty. However, CNBC anchor Andrew Sorkin expressed skepticism regarding the idea that citizens of countries facing inflation are actively seeking out Bitcoin to protect their wealth, suggesting that the narrative may be exaggerated to drum up speculation in the asset. Despite this skepticism, Wood remains bullish on Bitcoin’s potential to serve as a safe haven asset in turbulent economic times.
