NFTs, digital wallets will be huge opportunities

Ark Invest CEO Cathie Wood said on Tuesday that digital property rights related to non-fungible tokens (NFT) and decentralized finance (DeFi) that have underpinned the emergence of Web3 “will be incredibly important.”

“DeFi has taken off and we are impressed with how robust the ecosystem has been,” Wood said on CNBC’s “Squawk Box”, adding that the “token revolution” around NFTs is “mostly in its infancy.”

NFTs – unique digital assets, such as works of art and sports trading cards, verified and stored using blockchain technology – exploded in popularity in 2021. People create, collect and trade NFTs for millions of dollars, some hoping to make money money in the future. But experts are still skeptical that NFTs are a good investment.

Bill Gates spoke at a TechCrunch lecture on climate change last week, describing the crypto and NFT phenomenon as something that is “100% based on larger fool theory”, referring to the idea that overvalued assets will go up in price when there are enough investors who are willing. to pay more for them.

Billionaire Microsoft’s co-founder joked that “expensive digital images of monkeys” would “improve the world enormously”, referring to the much-hyped Bored Apes.

The increase in NFTs is still fairly new, but huge amounts of money have already changed hands among collectors. Since 2017, for example, NFT collectibles have generated over $ 6.2 billion in sales while digital art has generated over $ 1.9 billion, according to NonFungible, which tracks historical sales data for NFTs.

“We believe that digital property rights, which are what NFTs represent, are going to be incredibly important,” Wood said, adding that her financial background has taught her the value of property rights when it comes to lifting people out of poverty.

Creators in the NFT area have long put forward the same case, and investors, like Wood, have been quick to claim that the long-term value of digital assets will come from their benefit. This is a message that has been difficult for institutional investors to digest, as collectibles, such as the prominent Bored Ape Yacht Club, have taken a central stage in the early days of NFTs. These NFT collections have experienced a significant decline in value in recent months. Bored Ape Yacht Club and the equally hyped Crypto Punks recently saw prices fall sharply.

Some technical icons think more pain is coming. Eric Schmidt, former Google chief executive and CEO and co-founder of Schmidt Futures, told CNBC’s “Squawk Box” from the Aspen Ideas Festival on Tuesday: to walk.”

But Wood’s comments suggest she is not deterred by the recent sale.

“We are believers and we believe that the ecosystem, if consolidated, is not a bad thing. We believe that digital wallets will be one of the most important results here. They are in fact bank branches in our pockets,” Wood said. – This will be great opportunities.

The innovation-focused investor has had a tough 2022 as her disruptive technology lovers have been among the biggest losers this year in the face of rising interest rates. Her active flagship fund Ark Innovation ETF (ARKK) is down as much as 52% so far this year, and fell 66% from a record high in February 2021.

Nevertheless, Wood said that her customers largely agree with her and that new money is coming in as investors seek diversification in a declining market. ARKK had more than $ 180 million in inflows in June, according to FactSet.

Meanwhile, crypto-investors are also continuing to struggle with aggressive interest rate increases and a worsening liquidity crisis that has pushed major players into financial difficulties. The wider area is also still swollen after the collapse of the $ 60 billion collapse of two major tokens last month.

“Many expected that the Terra-Luna meltdown would cause a systemic chain reaction, and we see some of that, but so far the ethereum has held up very well,” Wood said of the debacle.

In addition to broader cryptocurrency concerns, Celsius, a cryptocurrency lending platform that promised high returns to users who deposited their cryptocurrency, took a break earlier this month. On Monday, the high-profile crypto hedge fund Three Arrows Capital defaulted on a loan worth more than $ 670 million from Voyager Digital.

– CNBC Yun Li contributed to this story.