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ARK Invest founder and CEO Cathie Wood says cryptocurrencies are not to blame for the failed Silicon Valley Bank (SVB) and Signature Bank, which were shut down by US authorities last Sunday.
Rather, she argues that the failures of Silicon Valley Banks and Signature Banks were the result of Federal Reserve policy. We believe that this has led to a reduction in deposits in our banking system, leading to financial difficulties for banks.
According to a highly respected wealth manager and investor, the bank’s woes are not due to cryptocurrencies, but to regulatory and systemic issues, and after the COVID-19 era of surplus money flows, many The bank didn’t seem to notice.
“Cryptocurrencies had nothing to do with banks’ investment decisions or the Fed’s decision to raise interest rates to 19x in less than a year. The Fed mistakenly assumed he was fighting 70s-style inflation and found many local banks incurring unrealized losses.” she insisted.
and twitter thread Posted on March 16, ARK Invest executives said despite yield curve inversion in July 2022 and credit default swaps, “flashing red‘, the Federal Reserve maintained its rate trajectory. In her view, the Fed didn’t pay attention to the unwinding of inflation indicators, including commodity prices.
“I am baffled that banks and regulators have failed to convince the Federal Reserve that catastrophe is looming. Didn’t they realize that for the first time since the 1930s deposits had left the banking system, asset-liability mismatches (normal for banks in most situations) were unacceptable?added ARK Invest CIO.
The asset-liability duration mismatch (only 1-2% returns on securities and 3-5% payments on deposits) became untenable as deposits began to leave the system. Some banks, like SVB, were forced to sell his HTM securities, draining stock accounts in recognition of their losses.
Cathy Wood (@CathieDWood) March 16, 2023
Wood commented on the events last week when the government shut down signing banks after the collapse of the SVB, saying this was just an attempt by regulators to scapegoat cryptocurrencies.A central point of failure, opacity, and solutions to regulatory fallacies“
Woods comments are based on a letter written by House Republican Rep. Tom Emmer to FDIC Chairman Martin Gruenberg, urging him to weaponize the instability witnessed in the financial sector to drive crypto activity out of the United States. He said he was trying to clean it up.
Congressman, if you are right, the FDIC and others will prevent the US from participating in the most important phase of the Internet revolution. Like you, I believe that regulators are using cryptocurrencies as scapegoats for their own missteps in overseeing traditional banking. https://t.co/UDh3bwB2pB
Cathy Wood (@CathieDWood) March 16, 2023
Wood believes this scapegoat could cause the United States to miss what is likely the most important innovation of all time.
ARK Invest’s CEO also commented on the overall market performance of cryptocurrencies amidst the impact of the banking sector. According to her, cryptocurrencies acted like safe haven assets as bank stocks crashed.
As highlighted here earlier this week, Bitcoin’s price actually crossed $26,000, leading the broader crypto market higher as the market reacted to the CPI data. reeling under the weight of uncertainty fueled by the crisis in the US banking industry.
