TLDR
- Cathie Wood predicts that the crypto liquidity crunch will reverse within the next few weeks.
- She expects three Federal Reserve policy changes to drive liquidity back into the markets before year-end.
- ARK Invest deployed over $93 million in a single day into crypto-related stocks during the downturn.
- Bitcoin has dropped below $88,000, marking a 30 percent fall from its October high of $126,000.
- ARK Invest increased its exposure to companies like Bullish, Circle, and BitMine Immersion Technologies.
Cathie Wood expects the recent liquidity crunch in crypto and AI markets to ease in the coming weeks. Her forecast follows three anticipated Federal Reserve policy changes expected by year-end. ARK Invest has deployed over $93 million into crypto equities during the current market downturn.
Crypto Markets Lead Liquidity Decline
Bitcoin fell below $88,000 after reaching an October high of $126,000. Cathie Wood pointed to this drop as evidence of liquidity stress. “Crypto is a leading liquidity indicator,” she said during a recent webinar.
The 30% drop led to $254 million in outflows from U.S. Bitcoin funds on November 17. The average ETF investor is now below water, with a cost basis near $89,600. Cathie Wood responded by accelerating ARK Invest’s crypto equity purchases.
On November 20, ARK acquired $42 million in Bullish, Circle, and BitMine Immersion Technologies. Total crypto exposure in ARK ETFs exceeded $2.15 billion. Holdings include Coinbase, Robinhood, Circle, and Bullish.
Cathie Wood maintains the highest crypto weighting in ARKF at 29%. ARKW follows at 25.7%, while ARKK holds 17.7%. ARK continues buying during downturns.
Federal Reserve Moves Could Loosen Liquidity
Cathie Wood cited three constraints that may soon ease: quantitative tightening, government spending freezes, and high interest rates. She expects the Fed to end quantitative tightening on December 10. “That pressure point will soon disappear,” she said.
The U.S. government shutdown ended, releasing funds from the Treasury General Account. These funds are now re-entering the economy. Cathie Wood called that constraint “behind us.”
She also predicted another rate cut before year-end due to weakening data. “We expect the Fed to take a more dovish tone,” she stated. Ten-year inflation expectations have fallen to around 2.5%.
Oil prices dropped below $60 per barrel, pushing deflationary pressure higher. New and existing home prices have both declined. Cathie Wood believes these trends support looser policy.
Cathie Wood Reaffirms Confidence in AI and Crypto
Cathie Wood dismissed concerns about an AI investment bubble. She compared current AI dynamics to early internet phases. “Transformation takes time,” she said.
Palantir’s U.S. commercial revenue rose 123% last quarter. She emphasized that as a sign of early AI adoption. ARK Research Director Brett Swift said AI is now core to institutional portfolios.
Cathie Wood also revised her 2030 Bitcoin target from $1.5 million to $1.2 million. She cited stablecoin growth as the reason. “Stablecoins are taking on Bitcoin’s expected role,” she explained.
ARK analyst David Bujnicki said Bitcoin’s safe-haven assumption dropped by 80%. Chainalysis data drove that model change. Still, Cathie Wood sees 1,100% upside from today’s levels.
Michael Saylor disagreed, saying Bitcoin and stablecoins serve different needs. “Bitcoin is digital capital,” he told CNBC. Cathie Wood remains confident in her long-term thesis.
