Cathie Wood, CEO of Arc Investment Management, discussed the current market size of the crypto business and expressed her belief in disruptive innovation during a recent update. She emphasised Bitcoin's unexpected behaviour during the recent crisis, as it normally performs poorly during risk-off periods, but this time it did the reverse and has exhibited considerable growth. Ether's value has also risen significantly.
Wood argues that the flight to safety trend is one to keep an eye on as numerous breakthroughs challenge the established world order. Despite government control and pressure, she believes cryptocurrency will become a political issue.
Wood also mentioned the year-over-year fall in M2 growth, which is negative for the first time since the 1930s, and its possible impact on the economy. She has been keeping an eye on this pattern for a year and believes it should be treated seriously. Since last spring, credit default swaps, which are insurance plans against bankruptcy, have also increased.
Last October, Wood saw that JP Morgan's credit default swaps were approaching the levels seen during the COVID crisis, indicating that something was wrong in the credit default swap market.
In more recent news, bankrupt cryptocurrency exchange FTX recovered nearly $7.3 billion in cash and liquid crypto assets, $800 million more than they had in January. This was mentioned by FTX's counsel during a bankruptcy court hearing in Delaware, where they also outlined the company's future intentions following months of gathering resources and assessing what went wrong under indicted ex-founder Sam Bankman-Fried.
Some believe that the market, in its wisdom, was paying attention last year and predicted that something would go wrong. This could explain the FTX recovery scenario. However, it is unclear whether we are nearing the conclusion of this situation, and given present dynamics, deposits are unlikely to float back into the banking system. If we have a soft or hard landing, inflation and interest rates will likely continue to fall, with the Fed following suit. In these things, the markets usually lead the Fed.
When markets began discounting the effects of inflation, interest rates, and supply chain concerns in February 2021, innovation-based tactics began underperforming. However, tactics based on innovation have performed well in the interim, indicating a potential flip side. Although the yield curve has declined from almost 100 basis points of inversion on March 8th to 58 basis points today, it remains inverted. Some argue that the 100 basis point inversion witnessed in the early 1980s was sufficient to limit inflation, but this view underestimates the strength of Fed restraint today. One percent against a 15-year bond yield is not the same as one percent against a four-year bond yield. From this vantage point, the Fed has been making a mistake, and we will most likely see more consequences in the future.
Source:
Money Talks, 15 April 2023, "Here's Why Bitcoin Is About To EXPLODE Cathie Wood's Latest Crypto Prediction",
