With the recent turmoil in the banking industry as a backdrop, Cathie Wood and her team at Ark Invest believe Bitcoin (BTC 1.60%) is displaying traits usually only seen in safe-haven assets such as gold.
Wood, with the help of her crypto analyst, earlier this week penned an open letter arguing that Bitcoin adoption was in the midst of a watershed moment. The letter coincided with a rise of more than 25% for Bitcoin in a week amid a series of banking failures in the U.S. and Europe.
Usually Wood’s crypto team publishes a monthly report highlighting noteworthy developments and statistics related to Bitcoin, but this one was unique because it was outside the normal publishing schedule, underscoring the urgency of the situation.
Renewed demand for reliability and transparency
In the letter, Wood and her team suggested that the reason Bitcoin had such a good week was because one of the main reasons Bitcoin was invented is being recognized: It is a viable alternative for those looking to store value.
Wood’s team pointed out that while the market was closed and news of bank failures circulated over the weekend, Bitcoin was operating just as it has for the past 14 years. In the same weekend banks were closed, Bitcoin didn’t skip a beat: It settled roughly $33 billion and about 600,000 transactions, issued 2,037 new Bitcoins, attracted about 1 million new addresses, and generated $43 million for miners securing the network.
And due to its decentralized nature, it did all of this without the need of any one specific company, agency, government, or person. In addition, unlike banks, which often operate in an opaque fashion and whose decisions are subject to the whims of a handful of decision makers or officials, Bitcoin offers users a transparent, auditable, reliable, and decentralized solution.
A decentralized future unfolds
Due to these novel characteristics, Bitcoin is in a unique position in the current economic landscape. Should the Federal Reserve continue to fight inflation by raising interest rates at an unprecedented pace, it is entirely possible that more regional banks will fail as they are forced to deal with an inverted yield curve and losses on bonds held in their investment portfolios. If this reality unfolds, Bitcoin’s price could become a true benefactor of a widening banking crisis.
However, whether this comes to fruition in the next few months or the next few decades remains a minor matter. Based on the current trajectory of Bitcoin’s growth in the past 14 years, more and more people are becoming aware that there is an alternative to traditional banking — one that isn’t dependent on any person or government, one that is reliable and verifiable, and one that operates with complete transparency. While we shouldn’t act with complete certainty, should more banks fail in the coming months, it seems likely this process will only speed up.
The best part is that the longer Bitcoin proves itself as a viable alternative, the more people will look to utilize the network. And as it proves more capable of supporting people’s needs, it will likely only attract more users. As this phenomenon occurs, it could lift Bitcoin’s price based on the old law of rising demand and a limited supply.
RJ Fulton has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
