‘Substitution’ of gold for Bitcoin is now underway, says Cathie Wood

Investors are started to move from gold to Bitcoin (BTC)  after the launch of spot Bitcoin exchange-traded funds (ETFs), according to the CEO of ARK Invest. 

“Relative to gold, Bitcoin has been rising. There’s now a substitution into Bitcoin and we think that is going to continue now that there is a less friction-filled way to access Bitcoin,” said ARK Invest’s Cathie Woods in a Feb. 4 chat with chief futurist Brett Winton on the firm’s YouTube channel.

Like gold, Wood expects Bitcoin to prove itself as a “risk off asset” when the banking sector shows signs of weakness.

The ARK Invest CEO said the market saw this firsthand in March 2023 when the United States experienced a “regional bank crisis,” — leading Bitcoin’s price to shoot up 40%.

“The Regional Bank index was imploding and here again, the Regional Bank index is acting up,” she said, adding:

“This idea that it's a flight to quality or a flight to safety is reasserting itself here.”

A recent analysis by Fidelity shows Bitcoin’s correlation with gold increased in 2023 and decoupled from its previously inverse relationship with interest rates despite global rates increasing worldwide.

The one-year rolling correlation between Bitcoin to gold currently sits at 0.80, according to Longtermtrends, which is the highest it has ever been.

Regarding the spot Bitcoin ETF launch, Wood said she wasn’t surprised by the price correction — which saw Bitcoin fall 20% from $48,500 a few hours after launch to $38,740 on Jan. 24, according to CoinGecko. Prior to launch, Wood predicted the launch would induce a “sell on the news” event.

However, she noted that 15 million of the 19.5 million Bitcoin currently in circulation haven’t moved in 155 days and thus remain in “strong hands,” which could indicate that most Bitcoin holders are taking a longer-term outlook.

Wood’s firm was one of 10 ETF issuers that launched a spot Bitcoin ETF on Jan. 11, named the ARK 21Shares Bitcoin ETF.

The Ark 21Shares ETF currently held $705.8 million in Bitcoin after trading hours closed last week, BitMEX Research data shows. Only Grayscale’s GBTC, BlackRock’s IBIT and Fidelity’s FBTC products hold more Bitcoin.

The Wood-led ARK Invest also became a big buyer in cryptocurrency exchange Coinbase stock (COIN) in February 2022, currently holding 7.187 million shares, worth $843 million, across several ETFs, data from Cathie’s ARK shows.

The firm has, however, been selling COIN rigorously since June 7, when it held 11.43 million shares.