Cathie Wood: Bitcoin Could Reach $1.5 Million
Summary
TLDRIn this interview, Kathy Wood, founder and CEO of Ark Invest, discusses the current state of Bitcoin ETFs and the impact of macro factors on Bitcoin's price. She highlights Ark Invest's early investment in Grayscale's GBTC fund and the subsequent growth in Bitcoin ETFs. Wood emphasizes the importance of education and research in understanding Bitcoin's dual role as both a risk-on and risk-off asset. She also touches on the potential of blockchain technology and cryptocurrencies to revolutionize the financial system, comparing it to the early days of the internet.
Takeaways
- 🎉 Kathy Wood, founder and CEO of Ark Invest, expresses optimism about Bitcoin and its growing acceptance as a new asset class.
- 💡 Ark Invest was an early investor in Grayscale's GBTC fund and continues to be bullish on Bitcoin despite market fluctuations.
- 🌐 The launch of Bitcoin ETFs has significantly increased awareness and demand for Bitcoin, contributing to its rising price.
- 📈 Macro factors such as interest rates, inflation, and potential recessions are influencing investor interest in Bitcoin as both a risk-on and risk-off asset.
- 🔄 The Nigerian Naira and Egyptian Pound devaluations highlight the global economic instability and the potential for Bitcoin as a safe haven asset.
- 🌐 The emerging market dynamics and financial system shocks are driving interest in Bitcoin as an alternative to traditional currencies.
- 💹 Kathy Wood sees Bitcoin's price increase as a combination of ETF demand and broader economic factors, rather than just ETFs alone.
- 🚀 Ark Invest's strategy for Bitcoin has evolved from just investing in GBTC to including public companies like Coinbase and Square, and exploring futures funds.
- 🌐 The introduction of Bitcoin ETFs and institutional investment is expected to increase liquidity and legitimize the asset class, potentially leading to lower volatility.
- 🔄 Despite the influx of new investors, Kathy Wood believes that Bitcoin's supply dynamics and its potential as a risk-off asset will continue to drive its unique return profile.
- 💡 The conversation highlights the potential for Bitcoin to disrupt traditional financial systems and the importance of education in understanding its role as a new asset class.
Q & A
What is Kathy's current assessment of Bitcoin ETFs?
-Kathy believes that Bitcoin ETFs are doing very well overall. She is particularly thrilled with their positioning, and she mentions that they are number three if you take out Grayscale. She also notes that the introduction of 11 ETFs at once has led to an unprecedented amount of energy, research, communication, and interest in Bitcoin and digital assets.
Why are people excited about Bitcoin's price going up?
-People are excited about Bitcoin's price increase for a couple of reasons. One is the demand for Bitcoin ETFs, which is outstripping supply. Additionally, there are macro factors such as interest rates, inflation, and potential recession that are driving interest in Bitcoin as an asset class.
How does Kathy evaluate Bitcoin in light of potential economic issues like interest rates and inflation?
-Kathy evaluates Bitcoin as both a risk-on and risk-off asset. She notes that there are warning signals from emerging markets, such as currency devaluations in Nigeria and Egypt, which could lead to a risk-off approach to owning Bitcoin. At the same time, she acknowledges that Bitcoin has historically acted as a risk-on asset, and its role may evolve as more people understand its potential as a new asset class.
What does Kathy think about the impact of Wall Street becoming a bigger player in Bitcoin?
-Kathy sees Wall Street's involvement as a positive development. She believes it will add more liquidity to the market, which is good for price discovery, and legitimize the new asset class. She also thinks that bringing in a new class of investor is important and that the introduction of Bitcoin ETFs will be a significant moment in history.
How does Kathy view the future of Bitcoin's return profile with the introduction of new players and larger pools of capital?
-Kathy expects Bitcoin to maintain its asymmetric return profile. She points out that Bitcoin has historically provided superior returns compared to other assets, with a compound annual rate of return of 44%. While she acknowledges that volatility may decrease as the asset grows larger, she believes that the superior returns will continue.
What is Ark Invest's strategy when it comes to Bitcoin?
-Ark Invest's strategy with Bitcoin is to buy and hold. They have been looking for exposure to Bitcoin since the early days, starting with Grayscale's GBTC, and have since invested in public companies like Coinbase, Square, and Robinhood that have exposure to Bitcoin and the broader digital currency ecosystem.
What is the investment thesis for Coinbase, according to Kathy?
-Kathy sees Coinbase as the most regulatory-compliant exchange in the world, which gives it an advantage, especially as it expands internationally. She believes that Coinbase's position as a trusted company in the United States will help it gain a foothold in other countries. Additionally, she highlights Coinbase's underlying protocol, which is generating organic demand without its own token, as a significant strength.
How does Kathy perceive the role of Bitcoin mining in the context of environmental concerns?
-Kathy argues that Bitcoin mining is not as environmentally damaging as critics claim. She points out that Bitcoin mining is already more than 50% renewable and is contributing to the development of renewable energy ecosystems. She also mentions that companies are using excess energy from solar and wind or even natural gas fields for Bitcoin mining, which is a more environmentally friendly use of that energy than flaring or venting.
What are some of the innovative developments happening with the Bitcoin network that Kathy finds fascinating?
-Kathy is intrigued by the convergence of artificial intelligence and the Bitcoin network, particularly in emerging markets. She mentions the development of a micro-gig economy powered by AI agents using the Bitcoin network through the lightning network. This is enabling new divisions of labor and economic opportunities in areas where there is a high demand for financial services.
How does Kathy view the potential of layer two solutions and sidechains for Bitcoin?
-While Kathy does not specifically discuss layer two solutions and sidechains in detail, she mentions that there is a lot of creativity in the Bitcoin community, and they are finding workarounds to improve the network. She cites the lightning network and optimism arbitrum as examples of such innovations.
What is Kathy's perspective on the four-year cycle of Bitcoin and the impact of new market players?
-Kathy acknowledges that there have been some deviations from the traditional four-year cycle, but she believes that the cycle may persist, especially as new investors enter the market. She emphasizes the importance of educating these new holders about the nature of Bitcoin as a new technology and monetary system, and she thinks that the halving event, which reduces the supply growth of Bitcoin, will continue to be a significant factor in its price dynamics.
Outlines
🤝 Introduction and Bitcoin ETFs Discussion
The segment begins with the host introducing Kathy Wood, the founder and CEO of Ark Invest, who joins the conversation remotely. The discussion quickly pivots to Bitcoin ETFs, with Kathy sharing Ark Invest's early involvement with the Grayscale GBTC fund and their perspective on the recent introduction of Bitcoin ETFs. Kathy expresses satisfaction with the reception of these new financial products and discusses the unprecedented energy and interest they have generated. She also touches on the role of macro factors such as interest rates, inflation, and potential recessions in influencing the demand for Bitcoin and its ETFs.
💡 Bitcoin's Role as a Risk-On and Risk-Off Asset
In this segment, Kathy delves deeper into Bitcoin's unique position as both a risk-on and risk-off asset. She references historical examples, such as Bitcoin's price movement during the European sovereign debt crisis, to support this view. Kathy also discusses the impact of emerging market currencies, like the Nigerian Naira and the Egyptian Pound, on Bitcoin's value and the increasing interest in Bitcoin as a hedge against economic instability. The conversation then shifts to the potential effects of Wall Street's involvement in Bitcoin and the anticipated changes in the asset's evaluation and industry development in the coming years.
📈 Bitcoin's Asymmetric Return Profile
Kathy addresses the historical performance of Bitcoin, highlighting its superior compound annual rate of return compared to other assets. She discusses the potential for reduced volatility and dampened returns as the asset class matures and attracts larger pools of capital. Kathy emphasizes the importance of liquidity and price discovery, suggesting that while Bitcoin's returns may not be as extreme in the future, it will still offer an asymmetric return profile relative to other investments. The conversation also touches on the strategies employed by Ark Invest in relation to Bitcoin and other digital assets, including exposure to public companies and futures funds.
🚀 Diversification in Cryptocurrency Investments
This segment focuses on Ark Invest's broader investment strategy in the cryptocurrency space, beyond just Bitcoin. Kathy outlines the firm's approach to diversification, which includes investing in companies like Coinbase, Square, and Robinhood that are positioned to benefit from the growing adoption of digital currencies. She discusses the potential for these companies to become dominant players in the digital wallet space and the importance of identifying and investing in businesses that are well-positioned to capitalize on the emerging digital economy. Kathy also mentions Ark Invest's private funds and the expertise they have brought in to analyze and navigate the cryptocurrency market.
🏦 The Future of Coinbase and Blockchain Technology
The discussion in this segment centers on Coinbase as a company and its role in the future of finance. Kathy explains Ark Invest's investment thesis behind Coinbase, emphasizing its regulatory compliance and international expansion efforts. She also explores the potential for Coinbase to compete with traditional banks and payment platforms like PayPal, and the unique value proposition it offers in the financial ecosystem. Kathy further discusses the impact of blockchain technology on financial services, likening it to the early days of the internet and the untapped potential it holds for revolutionizing the industry.
⚡️ Advancements in Bitcoin Network and Layer 2 Solutions
Kathy shares her insights on the developments within the Bitcoin network, including the lightning network and other layer 2 solutions. She discusses the challenges and creative workarounds being explored to enhance Bitcoin's usability and scalability. Kathy also touches on the intersection of artificial intelligence and Bitcoin in emerging markets, highlighting the potential for a micro-gig economy powered by AI agents using the Bitcoin network. The segment concludes with a brief discussion on the environmental impact of Bitcoin mining and the innovative solutions being implemented to mitigate these concerns.
🌐 Block's Vision for Financial Services
In the final segment, Kathy reflects on Block's (formerly Square) push into Bitcoin and its broader vision for financial services. She discusses the company's strategy in providing banking services to the unbanked and its efforts to build a two-sided marketplace for merchants and consumers. Kathy highlights the regulatory challenges Block has faced and its innovative approach to overcoming these obstacles, including its use of Bitcoin to expand its services globally. The conversation wraps up with a reflection on the potential of blockchain technology to revolutionize the financial system, likening it to the early days of the internet and the vast opportunities it presents.
Mindmap
Keywords
💡Bitcoin ETFs
💡Grayscale GBTC
💡Macro factors
💡Risk on/risk off
💡Emerging Markets
💡Financial system shock
💡Price discovery
💡Volatility
💡Layer 2 solutions
💡Blockchain technology
💡Cryptocurrency mining
Highlights
Kathy Wood, founder and CEO of Ark Invest, shares her insights on Bitcoin ETFs and the digital asset class.
Ark Invest was the first fund on Wall Street to invest in Grayscale's GBTC fund and is now focusing on Bitcoin ETFs.
The launch of 11 ETFs at once has created a surge in energy, research, communication, and interest in Bitcoin and digital assets.
Bitcoin's price increase is driven not only by ETF demand but also by macro factors such as interest rates, inflation, and potential recession.
Kathy Wood explains that Bitcoin can be seen as both a risk-on and risk-off asset, serving as a hedge against emerging market instability.
The Nigerian Naira and Egyptian Pound have devalued significantly, highlighting the risk off appeal of Bitcoin in emerging markets.
The Federal Reserve's dramatic interest rate increase has shocked the global financial system, leading to a focus on Bitcoin as an alternative.
Bitcoin's historical performance shows a compound annual growth rate of 44%, significantly outperforming other asset classes.
As Bitcoin gains more mainstream acceptance, its volatility is expected to decrease, potentially affecting its return profile.
Kathy Wood discusses Ark Invest's strategy of buying and holding Bitcoin, and how it has evolved over time.
Coinbase is a major part of Ark Invest's portfolio due to its regulatory compliance and international expansion.
Kathy Wood addresses the potential of Bitcoin mining to utilize renewable energy and reduce environmental impact.
The Lightning Network and other layer two solutions are being explored for enhancing Bitcoin's functionality.
Block (formerly Square) is pushing into Bitcoin with a focus on providing financial services to the unbanked and global reach.
Kathy Wood sees Bitcoin and blockchain technology as the foundation of a new, global financial system.
The conversation emphasizes the importance of education for new investors in understanding the potential of Bitcoin and digital assets.
The discussion also touches on the potential for Bitcoin to serve as an alarm system for issues within the traditional financial system.
Kathy Wood shares her perspective on the four-year cycle of Bitcoin and the impact of new market players on this trend.
The interview concludes with a look forward to future conversations and the ongoing evolution of Bitcoin and digital assets.
Transcripts
our next guest today is Kathy
[Music]
Wood Kathy uh unfortunately could not uh
join us in person so she's joining us
remotely uh Kathy is the founder and CEO
of Ark invest um Kathy can you hear
Andor see us I can hear you can you hear
me ah amazing there we go all
right uh dramatic entrance um let's
start the uh conver ation with your
current assessment of the Bitcoin ETFs
uh you guys were uh the first fund I
believe uh on Wall Street to buy into
the grayscale gbtc uh fund but now we
have ETFs and so how do you think it's
going uh well I think I think uh B all
accounts is going very well in in the
aggregate we're thrilled with uh our our
positioning um and actually somewhat
humbled I must say um uh so I think
we're number three um if you take out
gray scale so I'm very happy with that
uh very happy with the reception and you
know I think the interesting thing that
happened when you have 11 uh ETFs
approved at the same time that's never
happened before uh the amount of energy
and uh research communication that has
gone out uh around this spot Bitcoin ETF
oper opportunity um you know has been
unmatched and I think uh I think it's
done a great service uh for for Bitcoin
and digital assets generally because
this is just the beginning of a
completely new asset
class now one of the reasons that people
are excited is because bitcoin's price
is going up um some of that is because
there's a lot of people going into the
Bitcoin ETF and so demand is
outstripping Supply but there's also a
number of other macro factors there's
questions around interest rates around
inflation about a potential recession
incoming how do you evaluate uh Bitcoin
in light of these potential questions
and also why are people buying the ETFs
is it just the ETF alone or are there
maccro factors that are driving them to
buy
it well as I as I just mentioned I think
I think there's been a a lot of
communication about what Bitcoin
actually is in this new asset class uh
leading the chart
I know that our research team I know
yasen is there with you um has done an
amazing job uh not only in the last six
months or year uh but we've had research
extending back to two
2014 and so uh and and our first white
paper in 2015 when we took our first
exposure H and so we've been singing the
Praises of Bitcoin for a long time as a
new asset class so that's a start but I
do think there are some macro factors I
know Mike uh mentioned this earlier
we're very focused on what's going on in
the Emerging Markets uh right now I
think um with time uh many more people
will understand that the FED with a
24-fold increase in interest rates over
little more than a year's time has
absolutely shocked the financial system
around the world now many people are
looking at very short-term lagging
economic indicators here in the United
States primarily because the FED is
doing that but if you look at other
signals out there they um there there
are um um signals that not all is well
in the world I know Mike mentioned the
the Nara the Nigerian Nara um which has
devalued two by 2third since uh last
June now Nigeria is one of the
wealthiest countries oil rich in in
Africa and um with a new Administration
that's become very business friendly I
think they thought they could let the
currency float and um uh and they found
out you know that it has been very
painful from a purchasing power point of
view and from from a wealth point of
view um we've seen the same uh in in
Egypt that the the Egyptian devaluation
was uh 40% at the beginning of March uh
so I think I think that there's a bit of
a risk off reason for owning Bitcoin
emanating from the Emerging Markets
we've seen in Argentina with the new
Administration there I I think the the
currency I mean they made it official
what the black market already knew that
the currency was worth half of what it
was reportedly worth so I think we're
getting those warning signals I also
think you know yesterday we got the
Swiss bank cutting rates which was a big
surprise the UK turning a little more
doish the FED now a little more doish
why what are they seeing out there um
and so many people think of Bitcoin as a
risk on asset and it's certainly has
traded like that over time uh but we
have been looking at it as both risk on
and risk off uh and I can tell you when
we first uh when we first learned that
in
2015 uh when we took our first position
in uh Bitcoin via
gbtc Bitcoin was about
$250 and many people were making fun of
us at the time thinking oh they're
they're new we had just started our
funds in October 14 oh they're new
they're just trying to gain attention
this is a marketing gimmick and so we
were really on the spot first of all we
had done a lot of research we didn't
think uh we thought there was real
investment Merit but we were watching
like a hawk its moves and it back then
uh Greece was threatening to leave the
European Union and every time there was
a flare up uh you know and and a fear of
another European sovereign debt crisis
Bitcoin inched up and so we've been
looking at it as both a risk on and a
risk off asset for quite some time and
the Regional Bank crisis last year uh
kind of uh confirmed uh that point of
view that here Bitcoin um more than
doubled I think more than doubled as
Regional Banks were imploding so uh I
think many people are beginning to say
as they learn what this is wow could it
be both a risk on and a risk off asset
we think so now one of the interesting
things is uh individuals and maybe
family offices have been really excited
about Bitcoin being outside of the
system kind of this alarm system that
you're talking about with issues within
the traditional Financial system or the
banking system but what happens if Wall
Street becomes a bigger player within
Bitcoin it's kind of pulling Bitcoin
into the system to some degree and so
does that change the evaluation you have
of the asset or how you think think the
industry actually develops in the coming
years well it's certainly going to be
adding more liquidity that's good for
Price Discovery um I think it's
legitimizing this new asset class uh so
that's a very good thing I think
bringing in a new class of investor is
important and you know one of the
reasons that we wanted to do a Bitcoin
uh ETF even or a spot Bitcoin ETF even
after
um we we decided that it would probably
be very low fee given the way the
competition was going to evolve was you
know we're looking at uh Bitcoin as you
know the technology as well it is you
know a financial superhighway a public
good uh and so we think uh educating and
offering access to as many people as
possible uh in a less friction filled
way I mean many people just didn't want
to deal with you know uh wallets and so
forth is uh is is going to in hindsight
uh and when history is written I think
it's going to become a very important
moment in time now you mentioned that a
lot more liquidity will lead to or help
in price Discovery um there's a school
of thought that as these large pools of
capital come in and the asset gets
larger uh volatility will dampen and
returns will actually go down how do you
think about the asymmetric return
profile of Bitcoin historically and will
that continue in the future or does that
change now there's new players and
larger pools of
capital well asymmetric I mean uh there
aren't many assets out there that I
think can claim that they're both risk
on and risk off so uh for that reason um
uh we think that uh the the the return
profile is going to be uh certainly
relative to anything else out there you
know yasen and and team have done the
returns to bitcoin um I think this yes
is over the life of Bitcoin or um I
forget exactly he'll he'll tell you that
the period of time that we did we put in
our big Ideas uh
2024 um and if you look at bitcoin's
compound annual rate of return it's 44%
over that time time versus I think it's
4 and a half % for all other assets
combined uh so we think the superior
returns uh uh are going to be there this
is the beginning this is just the
beginning of this new asset class um yes
and the volatility is coming down um as
we look at are we going to have the same
returns from Peak to trough going
forward perhaps not um but we've come a
long way and and we still think we have
miles to go are you all doing anything
different since you first bought or has
it pretty much been Bitcoin is good Arc
is buying holding and that's the
strategy when it comes to bitcoin
specifically um well since we first we
were looking for exposure very early on
and the first exposure we could find was
gbtc but then as time went on um of
course uh public companies uh uh became
available with some exposure to uh to
bitcoin um coin base uh actually we had
done our first no our second white paper
with coinbase when I think it was either
doing it series a or doing it series B
uh so you know we were casting far and
wide uh for exposure to bitcoin and we
didn't have a private fund at the time
like we do now um so uh bitco coinbase
is now uh obviously a big part of our
portfolio Square as well uh Robin Hood
so um we're we're looking for the
companies that could potentially have
that uh that digital wallet that is um
probably going to become a winner take
most opportunity and so you've got
coinbase coming at it from the crypto
angle you've got uh uh Robinhood coming
at it from well starting with equities
and options and uh square with cash app
so um yes we're we're doing that we also
have launched uh some um Futures funds
uh I think that's pretty well KN known
three of which are actively
managed uh so one is Bitcoin cash uh one
is Bitcoin eth and these are all Futures
and then one is Bitcoin and all of these
digital wallet uh opportunities
potentially uh and then um we also have
uh private funds a cryptocurrency fund a
crypto revolutions fund which will you
know which will take us Far and Beyond
Bitcoin so we're doing a lot and getting
more and more excited about it and uh we
now have four uh four people uh
including yesin focused uh on the space
and one of them uh I might add is David
P puel many of you may know him if you
are in into onchain analytics uh some of
them are named after him because he
created them we hired him uh because uh
uh we can tell a lot about the market we
do a Bitcoin monthly piece examining the
health of the network and where we are
in the bull or the bare Market what
phase we're in we believe we're kind of
in midphase right now based on onchain
analytics and onchain Analytics also
help us with our trading strategies in
active management you mentioned coinbase
what's the investment thesis for a
company that obviously is the most kind
of regulated well-known brand in the
United States but why buy the stock here
and and what do you think the future
holds for them well we were buying it
when uh Regulators were torpedoing it or
attempting to at least um we post our
trades every day and um um I think many
people were very surprised to to see us
buying when uh coinbase got the wells
notice and the stock price went down 20
or 30% and then again when the the the
SEC sued them um coinbase is the most
regulatory compliant Exchange in the
world uh some of its competitors have
gone out of business FTX of course being
an important one uh binance has had its
share of issues as well uh CZ having to
step aside and the fines and so forth um
and coinbase is now going International
very importantly uh and uh I think as as
uh as The
Trusted um company that it is here in
the United States I think it will catch
hold uh in uh in the rest of the world
we're seeing it with an offshore
derivatives um exchange which is taken
off and is doing I think a lot better
than a lot of other people expected and
then we've got base uh you know they've
got an underlying protocol which is
generating organic Demand with millions
and millions of people already on it uh
compared to and and you know it doesn't
have its own token like ftt or B&B uh
it's truly organic demand so uh I think
it's got a lot going for it and again
you know it's a great way to capitalize
on a new asset class that um that is
going to create a new class of asset
managers we're all going to become power
users uh as as we participate in this
ecosystem we're not going to be you know
as much the I mean we call ourselves an
active manager but uh as you say we you
know Buy and Hold a stock if we really
like it uh we'll get to do a lot more in
this ecosystem as as an asset manager so
that's pretty exciting as well and
Yassin and his team
are really gearing up uh gearing us up
nicely for that when you look at
coinbase do you feel like um it could
compete with the banks in terms of you
know taking a 100% or a very large
portion of uh wallet share um or is it
something that's more Ain to competing
with the paypals and kind of payments or
maybe it's something that would be
competing more with like a Charles
Schwab and like an investment account
like where where does it kind of slot in
from a competitive standpoint with the
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a.com talk well I think I think all of
the above uh right um and and we'll see
over time where where where it has the
most success and where it chooses to to
focus
um but uh we think it's a very big idea
that's why we own it it's the top stock
in our um in our Flagship strategy uh
even bigger than Tesla now and you know
how positive we are on
Tesla now Tesla went up a lot people
were very excited uh people are
expecting Bitcoin to go up a lot they're
excited before this even happened um but
one of the big questions is will the
four-year cycle persist we obviously
broke a number of rules including we
went below the previous all-time high
we're now at an all-time high before the
having how are you thinking about
four-year Cycles Andor big draw Downs
now that these new players are in the
market um so you're asking me are do we
have a lot of weak holders and is this
going to disturb the cycle after that
the having is is that the nature of the
question we can call them weak holders I
like that
better um and and you know we're we're
trying to educate the the new holders
but by definition you know they they
haven't been doing this as long as we
have and so innately they they they Pro
they're not going to have the confidence
that we have that this is a new
technology
a new asset class a new monetary system
three very big each a big idea uh it
unto itself um so um as far as the
having I think what we're trying to do
in in terms of Education uh as we have
this new investor base is say you know
what for the first
time uh the the the supply growth of
Bitcoin it it as it drops from 1.9% per
year to roughly
.9% uh per year um come April uh it's
going it's hitting an important
Milestone um the the supply of uh gold
has been growing very long term on
average
1% so now I mean it's just marginally
but it is below the supply growth
uh of gold so um we're we're trying to
use that um to uh help people understand
a lot of the reason that gold became
such an a successful asset class is
because the supplied growth was fairly
controlled especially relative to uh
money growth out there in various
regimes including our own um and uh and
so I think I I don't see any reason why
the having won't be won't cause the same
Dynamic that it has in in the previous
Cycles especially as we're going out
there with that message um it doesn't
happen right away April and boom uh and
it it usually doesn't happen that way so
maybe they'll develop some impatience
but um uh we think that it um it
emphasizes one of the core features of
Bitcoin and the reason it is
uh a a a riskof asset as well as a risk
on asset how are you all thinking about
the lightning Network um some of the
layer twos or some of the side chains
things that are being built on top of
Bitcoin yeah um well it's interesting to
watch some of uh the layer twos optimism
arbitrum uh maybe taking some share here
um I think that the lightning uh Network
demand too much collateral and so uh you
know this is a very uh creative and uh
uh a creative community and they try and
find workarounds and and those seem to
be finding some success uh so but you
know one of the things that in terms of
the lightning Network that's been
fascinating um actually this was on one
of our Bitcoin brainstorms we do a
Bitcoin brainstorm every month uh I
think we've done it for seven months now
yasen uh and uh and the team with h
Bitcoin Park I don't know if you know
Rod Ruby from Bitcoin Park but we do
this once a month and uh the the second
one we did was just mindblowing to me I
I was wearing my economics hat the
Emerging Markets I understand about
those as well but there's a convergence
between artificial intelligence and uh
uh Bitcoin and the Bitcoin Network
that's taking place now and it's taking
place in the Emerging Markets we had for
those of you who know the uh the the
people involved in in the uh lightning
Network um his name is roast beef he's
one of the developers and he was telling
us uh in that in Africa what he was
witnessing was you know a a completely
new division of labor um we've gotten
used to Gig economy that concept here in
in the United States with Uber and
Airbnb and uh and other things uh but
you can turbocharge that into micro uh
the micro gig economy and uh uh AI
agents using um the Bitcoin Network
through lightning so um it's happening
but as as as so much is when it comes to
bitcoin um we're not seeing it as much
here as in the Emerging Markets where
you know there's more of a
need what about the mining businesses
obviously you all um really understand
Bitcoin and are enthusiastic are the
mining businesses more or less
attractive and and how do you think
about them in the
portfolio well we don't own any mining
stocks uh we have a very strong point of
view on on what many people criticize as
the environmental damage that uh Bitcoin
mining is doing you know it's
interesting I remember the dawn of the
internet um maybe not the John Dawn that
was DARPA and I didn't have anything to
do with it but as as it was beginning to
commercialize and we were beginning to
understand what it was um there was a
big controversy back then as well do you
know how much uh uh electricity the
internet is taking uh or using this is
this is terrible it's so wasteful it's
for criminals it's for uh pornography
it's for all of this stuff so this this
typically happens uh with uh with uh
Innovation um many people think it's for
nefarious uses and uh and they do not
see the the the bigger picture I think
the same is through here and we did a
seminar I think it was in 2020 um was
right after Tesla had put Bitcoin on its
balance sheet and received a lot of
criticism about uh the environmental
damage uh that Bitcoin was doing and so
with Jack dorsy and Elon we pulled
together it was a half day seminar I
think I I know it's still up somewhere
um and at that time we had written we
had done some research saying wait a
minute you know whether you know utility
ecosystems could um could use Bitcoin
mining for a very important purpose that
is all of the energy that's wasted when
storage units are filled with power from
the Sun or the
wind uh use that that that excess and
put it into Bitcoin mining and then
overbuild solar and wind
and that's exactly what's happening the
other thing that's happening that is
fascinating is um Exxon uh had I don't
know how much it's rolled out but I know
it had six it put Bitcoin mining
machines into six natural gas fields
around the world um and and basically
instead of flaring or venting the gas
and venting is much more uh damaging
environmentally um
them flaring uh they put it to use in
Bitcoin mining and uh and now companies
I know Caruso is another company doing
this so uh we actually I think if if if
I'm not mistaken um uh I think already
Bitcoin mining is uh the the energy use
is more than 50% renewable and now is
contributing to building out that uh
that ecosystem
how are you thinking about uh block
formerly known as Square uh they
recently um or last couple years made a
big push into Bitcoin uh a lot of their
revenue numbers seem to be tied to
bitcoin purchases at certain times and
now they've also come out with a
hardware wallet and so I know you guys
have uh been excited about that business
and maybe the investment thesis
there uh you mean block alog together or
the Bitcoin uh or the the wallet both
work okay uh sure
uh you know it's been fascinating to
watch this two-sided Market uh uh system
uh platform um you know in the beginning
we we did our very early research uh on
this and and we were
tracking where uh where cash app was
having
success relative to to PayPal uh that
was its main competitor at the time and
we saw that if you mapped uh where it
was having success it was in lower
income
areas and um and uh so uh and and it was
growing
virally uh and part of the reason was
this Merchant consumer two-sided
Marketplace uh so it was very early on
in fact I remember back then um in the
same quarter Jack dorsy and Mark Benny
off talked about this concept that there
would be no difference between consumers
and
businesses and I I heard them say it in
the same quarterly call and so it's like
wow okay what's going on here and so as
we traced this we said oh okay this is
providing services to the unbanked in
the case of cash app uh and uh
peer-to-peer uh and and and enabling
Merchants um to uh because block can see
every second of the day how well a
merchant is doing because most of the
payments go through it uh it was then
able to help these Merchants build their
businesses give them working Capital
Loans give them you know loans to make
new capital Investments uh um and then
it got into payroll and then of course
now it's offering consumers who stay
Within in its Network very lowcost uh
banking services so this is an ecosystem
that's evolving and you can see that
with Bitcoin this is a little bit of a
trojan horse I know a block or Square as
it was called at the time was just
running into one regulatory obstacle a
after another as it tried to enter new
markets and it basically said to heck
with this and uh is using Bitcoin now to
get into um other markets in fact it's
sell or shutting down or maybe selling
off uh some of the properties it bought
in Europe in order uh in order to do
this so I think um I think this is the
you know the world of offering uh access
to financial services broadly and as as
broadly and as inexpensively as possible
and going global doing it and you you
know it's very interesting when we try
and again this is all about education
explain to new investors what this
movement is um in the words I'll use
Chris berisi who was our uh first
analyst uh in 2014 on bitcoin and went
on to write a book I think he published
it in 2017 called crypto assets the
Innovative Investors Guide to bitcoin
and Beyond um he
recently um is helping to bring to life
I'd like to think his Arc Roots helped
him because he's bringing to life for
you know the average investor what this
really is this is the internet Financial
system really that's all this is the
developers in the early days of the
internet did not uh expect any Financial
Services or Commerce in fact the
internet was illegal for consumers to
use in the 80s I remember that and um
and then email was connected to the
internet in
1993 and uh and and it and it took on a
a new life but we still didn't expect no
one was going to put their credit card
on even when people were trying in those
early days I remember saying I wouldn't
do it and of course you see see what's
happened well what really should have
happened is developers should have added
in a a a lay a a layer uh for financial
services native to the internet that's
what blockchain technology is that's
what it is it's as simple as that and uh
so it's a very big idea it's a global
idea and a company like block and some
of the other of course coinbase um they
understand this um it's a very big idea
um think about how big the internet is
now and it has miles to go because we've
just begun I I appreciate your time
we're sad that you couldn't be here and
we'll definitely do it again in the
future next time yes thank you so much
for for letting me do this online I'm
I'm really really honored to have been a
part of this all right we'll see you
later okay bye pom
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