Elon Musk and the “ESG movement” are responsible for the recent drop in cryptocurrency prices, an influential fund manager said today at CoinDesk’s Consensus 2021 conference.
Cathie Wood, founder of Ark Investment Management, said bitcoin – which has lost up to 50% of its value in recent weeks – has come under pressure from institutional investors concerned about its environmental profile.
“He was rushed by the ESG [environmental, social and governance] movement and this notion, which was exacerbated by Elon Musk, that there are real environmental issues with bitcoin mining. Many institutional purchases have been halted, ”she told Nathaniel Whittemore in a pre-recorded interview aired Thursday.
Musk, who had boosted the markets by saying Tesla would buy bitcoin for his cash and accept it as payment for his cars, reversed course on the latter, pushing prices down.
“Elon probably got a few calls from institutions,” Wood said. “I noticed that BlackRock is [Tesla]The company’s third-largest shareholder and Larry Fink is its CEO. It focuses on ESG and in particular on climate change. I’m sure BlackRock has registered some complaints and maybe there are some really big holders in Europe who are extremely sensitive to this.
Wood, a renowned innovation investor, remains confident in the future of Bitcoin, which she described as the first “rules-based global monetary system.” Recently, speaking to Bloomberg, she predicted the cryptocurrency would reach $ 500,000.
In her appearance on Consensus Thursday, she predicted that central banks would start buying crypto assets for their balance sheets and that Musk would test positive for bitcoin in the long run, improving its environmental profile.
“He encouraged a lot more conversation, a lot more analytical thinking. And I believe he’s going to be part of the process, ”she said.
Figures like Lawrence Summers and Ray Dalio recently warned that government and central bank spending could push inflation up this year. But Wood, who is known to go against conventional wisdom, said deflation is more likely. She predicted a “significant” drop in commodity prices and that technologies such as artificial intelligence and blockchain will be used to lower costs for businesses.
“Over time, we think the much higher probability is deflation. I know most people think this is crazy, given what is going on. But we have already seen a price crack for some commodities, ”she said.
This, in turn, could lead some policymakers in emerging markets, if not the eurozone, to embrace hard money, including bitcoin.
“In emerging markets, if commodity prices fall, many of them are linked to commodity prices [and] their currencies will be under pressure, ”she said. “I wouldn’t be surprised if some of these emerging market central banks start hoarding bitcoin… because they know their currencies are going down and that they will come under attack as reserves go down. “
During his own appearance on Consensus this week, Dalio said bitcoin could become a victim of its own success: that governments would try to ban it because it would become a competitive threat. But Wood said governments have learned that innovation is the key to long-term growth and that technology – be it cryptocurrency and the internet before it – can’t really be stopped.
“They’re all trying to say, ‘Let’s have a better regulatory footprint here to attract more innovation.’ And I think that’s going to happen with, or is already happening with, cryptocurrencies, ”she said.
Wood said she was “very happy” to see Gary Gensler, known for his openness to cryptocurrency, installed as head of the Securities and Exchange Commission, alongside Valerie A. Szczepanik, who heads the organization’s strategic center for innovation. and financial technology.
Wood said bitcoin has proven to be a store of value and a way to protect against wealth confiscation. She said it has the potential to be a colony network after the introduction of Layer 2 solutions like the Lightning Network. But Ark is increasingly focusing on Ethereum, having invested in Grayscale’s Ethereum Trust and hired an Ethereum miner for its fintech analytics team. (Grayscale is a unit of Digital Currency Group, the parent company of CoinDesk.) “We are intrigued by stablecoins and [decentralized finance], of course, and [non-fungible tokens]. And we’re also very interested in the fact that developers are migrating very, very quickly. [to Ethereum]. I always say to our analysts, “Follow the developers, let’s see what they’re doing”. Because it’s a very strong signal, ”Wood told Whittemore.
As for Musk, Wood said he would help bitcoin miners “green” their operations. “This verification of what miners, certainly in North America, are willing to do with respect to the share of their electricity consumption produced by renewable energies will highlight this subject. This will encourage an acceleration in the adoption of renewables beyond which otherwise would have occurred. “
As described in a recent Square-Ark white paper, mining and renewables can develop in tandem, with bitcoin acting as a “battery” to absorb excess electricity produced from intermittent sources like solar. and wind power, said Wood. Indeed, mining can help finance renewable energy and make solar energy more attractive to innovation investors, including Ark.
The company previously didn’t see the potential to make big returns on solar and wind, but now that could change. “I’m actually very excited about this,” she said.