ARK Invest CEO Cathie Wood believes recent turbulence in the banking sector has demonstrated Bitcoin (BTC) and Ether (ETH)’s ability to withstand a shaky economy and perform akin to gold, outpacing other asset classes. However, long-term investor Ray Dalio remains unconvinced.
Wood stated in an interview on April 15 that Bitcoin’s resilience during the latest banking crisis was “the most remarkable” indicator her tech-focused investment management firm is tracking. She further suggests that Bitcoin and Ether are now functioning as “risk-off” assets and “flight to safety” assets, particularly in times of macroeconomic uncertainty.
“They’re going to disrupt the traditional world order. What are Bitcoin and Ether doing? I mean by the very fact that they’re being considered flight to safety like gold, that’s really interesting and suggests much broader-based adoption and acceptance than I think most people understand.”
“We would say that there is a flight to safety, certainly led by crypto assets, and it is telling us that the world is transforming and will continue to transform. You cannot stop innovation,” she added.
Why have bitcoin and other crypto assets appreciated during this banking crisis? In our view and in contrast to those in the traditional financial world, many crypto assets face no central points of failure: they are decentralized, transparent, and auditable.
According to Wood, cryptocurrency will eventually become an “election issue” once the industry is more widely accepted, and the public can see more clearly the regulatory pressure being applied by the United States government to maintain centralized control of money and monetary policy. However, not everyone shares her view.
In an interview on April 12, Ray Dalio, the founder of the world’s largest hedge fund by assets under management, Bridgewater Associates, stated that Bitcoin could not function as an “effective currency” because of its volatility, and central banks would not adopt it.
“Bitcoin is neither an effective store hold of wealth or a medium of exchange so it is not an effective currency. It has a volatility to it that has no relation to practically anything […] it’s a very, very poor alternative to gold.”
“They can outlaw [Bitcoin]. They can regulate it. Central banks and countries pretty much don’t want it anyway,” he added. The investor went on to say that Bitcoin gets attention “way out of proportion” to its size.
Dalio further solidified his argument by pointing out that gold is the third-largest reserve held by central banks, trailing only the US dollar and euros. Despite his past praise for Bitcoin, Dalio recently stated that he would like to see an “inflation-linked” coin created to ensure consumers maintain their buying power.
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