‘Sell Gold, Buy Bitcoin’: Cathie Wood Makes The Rotation Call

Overview

Cathie Wood, the CEO of ARK Invest, has expressed a strategic shift from gold to Bitcoin, citing key liquidity metrics and the dynamic supply characteristics of Bitcoin. Her comments, made during an interview, reflect broader themes in ARK’s investment outlook, emphasizing the potential growth of Bitcoin despite its recent performance.

Shift from Gold to Bitcoin

In a recent episode of The Rundown, Cathie Wood articulated her rationale for preferring Bitcoin over gold. She indicated that gold appears to be overextended based on critical liquidity-adjusted metrics. Wood’s analysis suggests that while gold has outperformed Bitcoin in recent years, the two assets are not correlated, a point she emphasized with statistical data showing their correlation is close to zero. Historically, Wood pointed out that gold has often led Bitcoin in market cycles, but she believes that Bitcoin will ultimately catch up.

Wood raised concerns about gold’s current positioning relative to broad money supply, referencing a chart that shows gold divided by M2 reaching an all-time high. She likened this scenario to historical extremes that occurred during periods of significant inflation in the 1970s and early 1980s, as well as during the Great Depression. Wood warned that gold may be poised for a decline, suggesting that its current valuation is unsustainable.

Additionally, she acknowledged the impact of the stablecoin boom on Bitcoin’s narrative within emerging markets, stating that stablecoins serve more as a payments-layer substitute rather than a replacement for Bitcoin as a savings asset. Wood believes that when investors seek genuine savings, they will gravitate towards Bitcoin, which she sees as a long-term positive indicator for the asset.

Supply Dynamics and Market Challenges

Wood highlighted Bitcoin’s supply growth, which is currently at 0.8% per year and is projected to decrease to 0.4% in two years. This is in contrast to gold, which she noted has an average supply growth of about 1%. She posited that gold mining output could surpass Bitcoin’s predictable issuance rate. Furthermore, Wood suggested that the ongoing intergenerational wealth transfer could serve as a potential catalyst for Bitcoin’s growth over time.

Wood also provided insights into Bitcoin’s recent struggles, attributing them to a flash crash that occurred on October 10 due to a software glitch at Binance, which triggered an auto-deleveraging event. This situation led to significant margin calls, amounting to approximately $28 billion, and Wood argued that Bitcoin, being the most liquid cryptocurrency, faced the brunt of forced selling during this deleveraging phase. She noted that this overhang is beginning to dissipate.

Despite the challenges, Wood expressed optimism about Bitcoin’s price stability, suggesting that the market was testing levels around $80,000 and expected it to maintain a range between $80,000 and $90,000 unless dramatic geopolitical events occurred.

From Author

Cathie Wood’s perspective underscores a significant shift in the investment landscape, particularly with regard to the comparative strengths of Bitcoin and gold. Her analysis presents a compelling argument for Bitcoin’s long-term viability and growth potential, rooted in its supply dynamics and the evolving financial ecosystem. As traditional assets like gold face scrutiny and potential declines, the case for Bitcoin as a preferred asset may gain traction among investors.

Impact on the Crypto Market

• Cathie Wood’s endorsement of Bitcoin may attract new investment interest, particularly from those seeking alternatives to gold.
• The analysis of supply dynamics could lead to increased awareness of Bitcoin’s scarcity relative to gold.
• The mention of a potential intergenerational wealth transfer may highlight Bitcoin’s appeal as a long-term store of value.
• The challenges faced by Bitcoin, including the recent flash crash, could lead to increased scrutiny and discussion about market stability and liquidity.
• Overall, the shift from gold to Bitcoin could signal changing investor sentiment and a reevaluation of asset allocations in the crypto market.