Ark Invest founder and CEO Cathie Wood believes the bond market “demands” that the Federal Reserve must relax its hawkish policy in the wake of SVB Financial Group (Silicon Valley Bank) error (NASDAQ:SIVB).
She also stated that the collapse of the regional bank proves that crypto poses no higher threat to investors than the traditional system.
“Regulators have focused investors on the threat crypto poses to users, but this weekend the theory was turned upside down. As a single point of failure in the US banking system, SVB became the threat to stablecoins and the DeFi ecosystem when it broke Circle’s USDC link to the $,” wrote on Twitter.
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What happened: The shocking news that SVB, the 19th largest bank, collapsed within 36 hours triggered panic in the financial sector. Banks of all sizes now fear they will suffer a liquidity crunch in the current economic environment, with already high interest rates putting pressure on banks.
Lower deposits in the second half of 2022 led to SVB’s balance sheet becoming negative, which Wood claims is a consequence of a yield curve inversion, which she pointed out on Twitter last September.
“US demand deposits – which make up the vast majority of M2 – have been falling since last August. Now we see the consequences of the yield curve inversion that began in July last year, which I feared in September last year and described in the thread below. The inversion has worsened,” she wrote.
See also: Goldman Sachs sees no basis for a rate hike in March
Wood’s warning: Wood said the Federal Deposit Insurance Corp.’s (FDIC) decision to give all depositors access to all their money on Monday, as the President Joe Biden repeated during his speech on the economy, “owners of stocks and bonds 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, this crisis will gobble up more regional banks and further centralize, if not nationalize, the US banking system.”
What about Crypto: “@yassineARK and the crypto team at@ARKInvest am not surprised by that #BTC and #ETH appreciated as US regional bank stocks imploded. Their blockchains are decentralized, transparent and controllable. Banks are not, and in the last few days they have become less,” Wood said.
Read next: Regional bank stocks get crushed Monday: Here are 19 stocks down 10% or more
Photo: ThomasAFink via Shutterstock
