Is the banking fiasco a boon for Bitcoin? Cathie Wood thinks so

With the recent turmoil in the banking industry as a backdrop, believes Cathie Wood and her team at Ark Invest Bitcoin (BTC 1.65%) exhibits characteristics usually only seen in safe assets such as gold.

Wood, with the help of her cryptanalyst, wrote an open letter earlier this week arguing that Bitcoin adoption was in the middle of a watershed. The letter coincided with a more than 25% rise for Bitcoin in a week amid a series of bank failures in the US and Europe.

Typically, Wood’s crypto team publishes a monthly report highlighting notable developments and statistics related to Bitcoin, but this one was unique because it was outside of its normal publishing schedule, underscoring the urgency of the situation.

Renewed requirements for reliability and transparency

In the letter, Wood and her team suggested that the reason Bitcoin had such a good week was because one of the main reasons Bitcoin was invented is being recognized: It’s a viable option for those looking to store value.

Wood’s team pointed out that while the market was closed and news of bank failures circulated over the weekend, Bitcoin was performing exactly as it has for the past 14 years. In the same weekend that the banks were closed, Bitcoin didn’t skip a beat: It settled about $33 billion and about 600,000 transactions, issued 2,037 new Bitcoins, attracted about 1 million new addresses and generated $43 million for miners securing the network .

And because of its decentralized nature, it did all of this without the need for a specific company, agency, government, or person. Additionally, unlike banks, which often operate in an opaque manner and whose decisions are subject to the whims of a handful of decision-makers or officials, Bitcoin offers users a transparent, auditable, reliable and decentralized solution.

A decentralized future is unfolding

Because of these new features, Bitcoin is in a unique position in the current economic landscape. Should the Federal Reserve continue to fight inflation by raising interest rates at an unprecedented pace, it is entirely possible that several regional banks will fail as they are forced to deal with an inverted yield curve and losses on bonds held in their investment portfolios. If this reality unfolds, Bitcoin’s price could become a true benefactor of an extended banking crisis.

However, whether this will be realized in the next few months or the next decades is a small matter. Based on the current trajectory of Bitcoin’s growth over the past 14 years, more and more people are becoming aware that there is an alternative to traditional banking – one that is not dependent on any person or government, one that is reliable and verifiable, and one that operates with complete transparency. While we should not act with complete certainty, if more banks were to fail in the coming months, it seems likely that this process will only accelerate.

The best part is that the longer Bitcoin proves to be a viable option, the more people will look to use the network. And as it proves more capable of supporting people’s needs, it will likely only attract more users. When this phenomenon occurs, it can raise Bitcoin’s price based on the old law of increasing demand and a limited supply.