Imagine a world where bitcoin and cryptocurrency just completely took over. There are no more standard financial investment tools, and things like stocks and bonds cease to exist. The entire world is based on cryptocurrency, and everything is paid for in bitcoin. While it may be many years until we reach a society like this, Cathie Wood of ARK Invest thinks we’re heading in that direction.
Cathie Wood: BTC Will Replace Bonds
In a recent interview, the monetary executive claimed that she’s confident bitcoin will one day replace bonds, and that the currency is going to be a primary staple of many professional portfolios. She says:
You think about the traditional 60/40 stock and bond portfolio but look what’s happening to bonds right now. If we’re ending a 40-year secular decline in interest rates, that asset class has done its thing. What’s next? We think crypto could be the solution.
Right now, bonds are selling off at an alarming rate. In addition, many analysts are convinced that the inflation that exploded in 2020 is going to continue throughout the new year, and this will ultimately cause many bonds to lose their worth. Institutions such as the Federal Reserve have continued to purchase bonds as a means of keeping the economy stable, and this has caused bitcoin to increase in value according to Wood.
She’s confident that so long as this behavior continues, people will eventually turn their backs on bonds and begin investing further in bitcoin and assorted cryptocurrencies. She states:
We know there’s a concern given all the quantitative easing and the no-rules based monetary policy out there. Fixed income has done 40 years of really hard work. If bitcoin represents a new asset class, why not invest in it?
Wood mentions that last year saw huge bouts of technological innovation come about, and this has also contributed to the death of the dollar and the inflation experienced by the U.S. and other established countries. She also says that while many aspects of the global economy are still based on gold, much of the money and financial flow designed for gold saw itself going to BTC over the past 12 months.
Gold Isn’t as Big as It Once Was
The dollar dropping seven percent on a trade weighed basis last year and falling further this year is another stimulus. It should be a stimulus for gold, but bitcoin is getting the incremental flows that might go to gold.
We are seeing clear evidence of this by simply viewing the prices of both assets. For example, while gold ultimately rose beyond the $2,000 mark in the year 2020, it is presently down by a little more than six percent, while bitcoin – despite a sudden dip in the past week – is still up 75 percent compared with where it was at the beginning of the year.