3 - 5 minute read
Bitcoin and Ether are widely being considered flight-to-safety investments, comparable to gold, as per the recent turmoil in the banking sector, according to an interview with ARK Investment Management’s CEO, Cathie Wood. However, Ray Dalio, the founder of the world’s largest hedge fund by assets under management, Bridgewater Associates, isn’t entirely convinced.
Wood recently stated that the recent banking crisis was “the most remarkable” example of cryptocurrency’s resilience and that crypto assets like Bitcoin and Ether are now acting as “risk-off” assets and as a “flight-to-safety” for investors during macroeconomic uncertainty. Bitcoin and Ether, she explains, are disrupting traditional world orders and will continue to do so because of their broader-based adoption and acceptance.
However, Dalio thinks otherwise, explaining in an interview that Bitcoin is neither an effective storehold of wealth nor a medium of exchange, and it’s a very, very poor alternative to gold. Gold is the third-largest reserve held by central banks after the US dollar and euros, and Dalio suggests that he wants to see an “inflation-linked” coin be built that would serve to ensure consumers secure their buying power.
Wood’s belief in cryptocurrency, particularly Bitcoin and Ether, indicates that she believes that they will eventually become an “election issue” due to their widespread adoption and that the public will begin to notice the regulatory pressures being applied on the industry to maintain centralised control over monetary policy.
Dalio’s scepticism is largely due to Bitcoin’s volatility and its lack of centralised control, which could be regarded as too risky by central banks. If central banks do eventually adopt cryptocurrency, they will likely want to have some control, thereby replicating the current system.
Given this negative feedback loop, why will deposits flow back to regional banks? If they do not, then M2 growth is likely to accelerate further into negative territory for the first time since the 1930’s, putting significant stress on both commercial and residential real estate.
— Cathie Wood (@CathieDWood) March 23, 2023
The Bottom Line
Many people are taking note of the current upheavals in the banking sector. A persuasive case has been made regarding Bitcoin and Ether’s ability to withstand the banking crisis and function like gold, despite their volatile history. Nonetheless, Ray Dalio believes that they cannot serve as an “effective currency,” and they would need to be modified. While value predictions are difficult, cryptocurrency investors may want to continue to monitor market headlines to identify risks or potential opportunities.
