Cathie Wood Issues Fed A Warning Over SVB Failure, Touts Crypto: 'Not Surprised That #BTC and #ETH Appreciated'

Ark Invest founder and CEO Cathie Wood believes the bond market is “demanding” the Federal Reserve must relax its hawkish policy in the wake of SVB Financial Group’s (Silicon Valley Bank) failure SIVB.

She also stated the regional bank’s collapse proves crypto poses no higher threat to investors than the traditional system.

“Regulators have focused investors on the threat that crypto poses to users, but this weekend turned that theory upside down. As a single point of failure in the U.S. banking system, SVB became the threat to stablecoins and the DeFi ecosystem when it broke Circle’s USDC peg to the $,” Wood wrote on Twitter.

What Happened: The shocking news that SVB, the 19th largest bank, collapsed within 36 hours sparked panic across the financial sector. Banks of all sizes are now fearful that they will suffer a liquidity crisis in the current economic environment, with already high-interest rates adding pressure on banks.

Lower deposits during the second half of 2022 caused SVB’s balance sheet to turn negative, which Wood pegs as a consequence of a yield curve inversion, which she pointed out on Twitter last September.

“U.S. demand deposits — which make up the vast majority of M2 — have been falling since last August. Now we are seeing the consequences of the yield curve inversion that began last July, which I feared last September and described in the thread below. The inversion has worsened,” she wrote.

See Also: Goldman Sachs Doesn't See Case For March Fed Rate Hike

Wood's Warning: Wood said the Federal Deposit Insurance Corp.’s (FDIC) decision to allow all depositors access to the entirety of their money on Monday, which President Joe Biden reiterated during his address on the economy, “equity and bond holders will be wiped out.”

“If the Fed continues to focus on lagging indicators like the CPI, and does not pivot in response to the deflationary forces telegraphed by the inverted yield curve, then this crisis will devour more regional banks and further centralize, if not nationalize, the U.S. banking system.”

What About Crypto: "@yassineARK and the crypto team at@ARKInvest are not surprised that #BTC and #ETH appreciated as U.S. regional bank stocks imploded. Their blockchains are decentralized, transparent and auditable. Banks are not and, in the last few days, have become less so," Wood said.

Read Next: Regional Bank Stocks Getting Crushed Monday: Here Are 19 Stocks Down 10% Or More

Photo: ThomasAFink via Shutterstock