Ark Invest founder and CEO Cathie Wood defended bitcoin’s role as an inflation hedge during a Wednesday panel discussion alongside Jack Dorsey and Elon Musk.
The fund manager said bitcoin will serve as a hedge against inflation in certain situations, citing emerging markets as an example.
“There are a lot of emerging markets that are suffering from significant inflation-in other words, the purchasing power of those populations is going down. So they are going to migrate to bitcoin and other ways to preserve purchasing power,” Wood said.
She made the remarks when asked what advice she would give for institutions looking to put bitcoin on their balance sheets. Wood added that being able to sell to people who have migrated to bitcoin in inflationary situations would be “very useful” for corporations.
Earlier in the panel, Wood discussed how bitcoin’s fixed supply of 21 million tokens helps it’s role in preserving purchasing power.
Cathie Wood has added to her bitcoin holdings with another purchase of shares in the Grayscale Bitcoin Trust after the cryptocurrency fell below $30,000 on Tuesday for the first time in almost a month, according to data from her ARK Invest fund.
Wood’s ARK Next Generation Internet fund bought 140,157 shares in the Grayscale Bitcoin Trust.
She’s a self-proclaimed cryptocurrency fan. Her funds hold stakes in crypto exchange Coinbase and payments company Square, which in turn owns a sizeable amount of bitcoin on its balance sheet.
As of Tuesday, ARK’s holdings in Grayscale’s bitcoin trust reached 8.986 million shares.
Grayscale’s trust is the world’s largest bitcoin investment vehicle. It gives investors exposure to the price of bitcoin without having to buy or store it.
Bitcoin reached a five-week low of around $29,400 on Tuesday. Bitcoin has been trading up 5.74% in the last 24 hours. Since hitting an all-time high in April near $64,000, it’s fallen by more than 50%, but is still up by more than 220% compared with last year.
ARK also purchased another 18,735 shares in Coinbase via its ARK Fintech Innovation Fund, according to the company’s website.
Wood is hosting the “B Word” cryptocurrency conference later on Wednesday. It will feature the likes of crypto-influencers like Elon Musk, CEO of Tesla and Jack Dorsey, CEO of Twitter.
Shares of Coinbase climbed as much as 6% on Thursday following its debut on the Nasdaq on Wednesday, after various funds managed by Cathie Wood’s ARK Invest snapped up around $250 million worth of shares.
The stock pared gains in early trading, rising 1.1% to $331.75 at 10:35 a.m. in New York.
The listing of Coinbase was celebrated by many cryptocurrency bulls who view the move as a milestone for the digital currency ecosystem that has long faced scrutiny and skepticism.
“Coinbase’s direct listing on Nasdaq is a major step forward in bringing legitimacy and mainstream awareness to the digital asset sector as a whole,” Brad Kam, co-founder of Unstoppable Domains, told Insider.
“For the next billion cryptocurrency users, it will be critical that we focus on ease of use. Millions in funds have been lost due to typos in hard-to-read wallet addresses or simply sending the wrong coin to the wrong wallet,” he said.
Elon Musk asked Cathie Wood this week what she thought about Warren Buffett’s favorite market indicator flashing red recently. The star stock-pickerreplied that the gauge is likely inaccurate, and argued the heady valuations of certain technology stocks are justified.
“What do you think of the unusually high ratio of S&P market cap to GDP?” the Tesla chief asked the Ark Invest boss. He was referring to a version of the Buffett indicator, which takes the combined market capitalization of a country’s publicly traded stocks and divides it by the latest quarterly GDP figure available.
The S&P 500 represents about 78% of the total market cap of US stocks, as measured by the Wilshire 5000 Total Market Index. The S&P 500’s combined market cap has surged past $33 trillion this year – more than 150% of the latest estimate for fourth-quarter US GDP of $21.5 trillion.
Wood replied to Musk’s question by suggesting that GDP understates economic growth because it doesn’t fully account for increased productivity. Technological innovations today are “dwarfing” those in previous eras, driving down prices and fueling demand, she continued.
The Ark founder also drew a line between the dot-com bubble and the current hype around tech stocks.
“Back then, investors chased the dream before the tech was ready and while costs were too high,” she said. “After gestating for 20-30 years, the dream has turned into reality.”
Moreover, Wood predicted that companies that have failed to innovate and instead have borrowed money to fund stock buybacks and dividends “will pay a steep price.” She expects them to be forced to cut prices to shift inventory and make debt repayments.
In short, Wood’s view is that the disconnect between the S&P 500’s market capitalization and national GDP isn’t worrying because GDP is a flawed measure, unprecedented innovation justifies higher company valuations, and technological advances are cutting costs so inflation won’t be a problem either.
Her stance clashes with Buffett’s praise of his namesake gauge as “probably the best single measure of where valuations stand at any given moment” in a Fortune article in 2001. When the indicator peaked during the dot-com boom, it should have been a “very strong warning signal” of an upcoming crash, the Berkshire Hathaway CEO wrote.
Musk might have to wait a few more months to find out which investor is right.
Tesla shares recovered on Wednesday as investors bought a recent dip in the stock that saw the electric automaker’s 2021 gains wiped out.
The firm’s shares climbed as much as 4%, paring an 11% loss over the prior two trading days.
The rebound came after Ark Investment Management CEO Cathie Wood said on Tuesday that she had “bought the dip” on Tuesday, or purchased shares at a discounted price after a decline. Tesla stock tumbled as much as 13% at intraday lows during the session.
Editas Medicine soared as much as 50% on Monday to record highs amid recently commentary from ARK Invest founder Cathie Wood saying genomic stocks will drive returns for her investment portfolios over the next five years.
In an interview with Bloomberg on Friday, Wood said her and her team believes “the next FANG [stocks] are in the genomic age,” adding that healthcare is the largest sector exposure in ARK’s flagship disruptive innovation ETF.
Editas Medicine is the 11th-largest holding in the ARK Innovation ETF, and CRISPR Therapeutics is the second largest, according to data from ARK Invest.
Shares of Editas Medicine, a genome editing company that utilizes CRISPR technology, soared as much as 50% to new all-time highs on Monday. There was no official news from the company to explain the move higher.
The move does follow a Friday interview conducted by Bloomberg with ARK Invest founder Cathie Wood, who explained that she sees genomic stocks driving the bulk of the gains for her flagship fund over the next five years.
“The biggest upside surprises are going to come from the genomic space, and that’s because the convergence of DNA sequencing, artificial intelligence, and gene therapies are going to cure disease,” Wood said.
Wood, who is the portfolio manager of ARK’s flagship ARK Innovation ETF (ARKK), has made healthcare the biggest sector exposure for the portfolio, even eclipsing technology.
“We actually think the next ‘FANG’ [stocks] are in the genomic age,” Wood said.
The potential for genomic stocks could be massive, according to Wood, who foresees a combination of artificial intelligence and gene editing allowing scientists to anticipate and cure diseases like sickle cell disease and diabetes.
Wood has put her money where her mouth is. Behind Tesla, the third largest holding in the ARKK ETF is CRISPR Therapeutics, a gene editing company that makes up 5.7% of the fund.