An initial reaction turns out to be false.
Trouble began for the US banking system on March 8 when cryptocurrency-focused bank Silvergate Capital announced it would cease operations.
When chaos erupted at Silicon Valley Bank (SVB) the next day, its shares plunged 60 percent and talk of a bailout began.
DON’T MISS: Cathie Wood calls reaction to SVB collapse ‘disturbing’
On March 10, a run on SVB’s deposits led to the bankruptcy of the bank. Regulators took over.
Investors were quick to find out the market implications of these events as they also caught up with the First Republic. (FRC) – Get a free reportand signature bank (sbny) – Get a free reportstocks.
Meanwhile, Ark Invest’s Cathie Wood believed the immediate main explanation for SVB’s collapse was misplaced.
There was an assumption, largely because Silverdale fell first, that all of these developments were an extension of the 2022 crypto flaws. Wood has a different interpretation.
“Despite mainstream rhetoric, equity and fixed income markets are beginning to recognize that crypto had nothing to do with the Silicon Valley Bank and Signature Bank bankruptcies,” he wrote with Yassine Elmandjra in an Ark newsletter on March 20. “Instead, they began to imply the ill-advised decision by the US Federal Reserve (Fed) to raise interest rates 19 times, a record rate, in less than a year.”
Wood noted that between March 11 and 14, as banks stumbled and fell, Bitcoin, Ethereum, and other crypto networks “didn’t miss a beat.” Bitcoin appreciated around 20% during the period.
“In the face of the US and European banking crises, bitcoin’s price appreciation suggests that lax regulatory oversight had no impact on the decentralized, transparent and auditable crypto-asset ecosystem,” according to the bulletin. “On the contrary, bitcoin and other crypto assets act as safe havens.”
Wood believes that the main attributes of cryptocurrencies are precisely what is needed in today’s environment.
“Demand for more transparent, auditable, and decentralized financial services has skyrocketed because, in our view, cryptocurrencies are a solution to central points of failure, opacity, and regulatory lapses in the traditional financial system,” said the bulletin.
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