Cathie Wood says crypto had “nothing to do” with SVB and Signature Bank collapses.
Rather, it’s Fed policy that “caught many regional banks offside.”
She said that banks suffered because of mismatches in assets and liabilities.

Cathie Wood, the founder and CEO of ARK Invest, says crypto isn’t responsible for the failed Silicon Valley Bank (SVB) and Signature Bank, which was shut down by US authorities last Sunday.

Rather, she contends that the bankruptcies of Silicon Valley Bank and Signature Bank were a result of the Federal Reserve’s policy. She believes that the lack of venture capital funding and higher yields on money market funds led to a reduction in deposits in the US banking system, contributing to the banks’ financial troubles.

Wood: The Fed caught many regional banks offside

According to the highly respected asset manager and investor, the banks’ struggles are not due to crypto but down to regulatory and systemic issues, with many banks caught unawares after the surplus money flows of the COVID-19 era.

“Crypto had nothing to do with the banks’ investment decisions, nor the Fed’s decision to jack up interest rates 19-fold in less than a year. Incorrectly assuming that it was fighting a seventies-style inflation, the Fed caught many regional banks off sides with unrealized losses,” she argued.

In a Twitter thread posted on 16 March, the ARK Invest executive noted that despite the yield curve inverting in July 2022, and with credit default swaps “flashing red”, the Fed maintained its upward rates trajectory. According to her, the Fed failed take note of inflation indicators that were unwinding, such as commodity prices.

“I am baffled that banks and regulators could not convince the Fed that disaster loomed. Did they not understand that the asset/liability mismatch – normal in most circumstances for banks – was untenable as deposits left the banking system for the first time since the 1930s?,” the ARK Invest CIO added.

The asset/liability duration mismatch – securities earning only 1-2% vs. deposits paying 3-5% – became untenable as deposits started leaving the system. Some banks had to sell HTM securities due to the recognition of losses that depleted equity accounts, just like SVB.

— Cathie Wood (@CathieDWood) March 16, 2023

Commenting on what happened last week, with the government shutting Signature Bank after SVB’s collapse, Wood says that all this is just about regulators trying to scapegoat crypto. In her opinion, cryptocurrency is “the solution to central points of failure, opacity, and the regulatory mistakes.”

Wood’s comments came as House Republican Whip Rep. Tom Emmer, said he had written to FDIC Chairman Martin Gruenberg about reports the agency was “weaponizing” the instability witnessed in the banking sector to purge cryptocurrency activity from the United States.

If you’re correct, Congressman, the FDIC, and other regulators will stop the US from taking part in the most crucial phase of the internet revolution. As you, I think regulators are using cryptocurrency as a way to justify their oversight of traditional banking. https://t.co/UDh3bwB2pB

— Cathie Wood (@CathieDWood) March 16, 2023

Wood thinks this could lead to the US missing out on the most significant innovation of all time.

The CEO of ARK Invest also spoke out about the market performance of cryptocurrencies in the wake the bank sector collapse. She said that crypto was more like a safe haven asset when bank stocks fell.

This week’s highlights highlighted that Bitcoin prices broke through $26,000, leading the wider crypto market higher as markets responded to CPI data. Stock markets were struggling under the uncertainty created by the crisis in the US banking sector.