Cathie Wood Says Crypto Bear Market May Be "Close to the End"
Ark Invest's Cathie Wood is optimistic about crypto and Bitcoin. Ark Invest's Cathie Wood says the correlation of stocks and crypto is one way to recognize a bear market, and that it could even signal the beginning of the end. Wood also thinks the Federal Reserve may not raise rates by 0.50% in June. Crypto investors can take heart from Wood's optimism on crypto assets long term.
It's been a rough few months for crypto investors and many people want to know if the end is in sight. Lead crypto, Bitcoin (BTC) is down over 50% from its November all-time high, and other cryptos have lost even more value. As is often the case with cryptos, expert predictions vary wildly. Some are sure we'll see further collapse while others foresee rallies to new highs. Ark Invest's Cathie Wood is optimistic.
In a recent YouTube video, the prolific investor said, "You know you're in a bear market, and maybe close to the end when everything starts acting alike. And we're seeing the capitulation of one market after another." She pointed out, "Crypto -- a new asset class -- should not look like the Nasdaq, but it does."
Understanding Cathie Wood's optimism
Wood is the founder, CEO, and CIO of Ark Invest, an investment firm that focuses on disruptive technologies and innovation. Here are the two main reasons she is positive about an end to the crypto bear market:
She thinks the correlation with stocks is an exception to the rule.
She foresees an end to the hawkish moves from the Federal Reserve.
Let's look at each of these individually.
Correlation with stock market
According to Bloomberg, Bitcoin now mirrors U.S. stocks to an "unprecedented degree." But the Ark team believes this is an anomaly that will correct with time. "It is ridiculous that the genomic revolution and blockchain technology and crypto assets are all behaving exactly alike," said Wood. She explains that crypto assets began to mirror the Nasdaq at the beginning of COVID-19, but before that there was no correlation at all.
Why does the correlation with stocks matter? Prior to the pandemic, Bitcoin was often seen as a non-correlated asset that could help diversify a portfolio. If crypto now follows the stock market, this narrative no longer holds true. Earlier this year, the IMF also warned that this correlation raises the risk of contagion across markets.