ARK Invest CEO Cathie Wood forecasts the liquidity squeeze hitting crypto and AI markets will reverse within weeks, driven by three Federal Reserve policy shifts expected before year-end.
Her firm continues aggressively buying crypto equities during the downturn, deploying over $93 million in a single day this week across beaten-down digital asset stocks.
Wood’s prediction comes as Bitcoin trades below $88,000 after falling from its October peak of $126,000, while crypto-linked equities are facing their sharpest monthly declines since early 2024.
Speaking during ARK’s November market webinar, she identified three temporary liquidity constraints she expects to ease rapidly through Federal Reserve action and reopened government spending.
December Relief: Fed Policy and Inflation Data
Wood expects the Federal Reserve to end quantitative tightening at its December 10 meeting, immediately easing one pressure point.
The government shutdown that caused the Treasury General Account cash buildup has concluded, returning funds to circulation.
“We think that source of a liquidity squeeze is behind us,” Wood stated during the webinar.
Interest rates remain the third constraint, but Wood anticipates another December cut as economic data weakens.
“We think we will get another cut in December, and that the Fed will shift from what seems to be a hawkish tone right now back into a more dovish tone as we approach that date,” she explained.
Ten-year Treasury yield inflation expectations fell to approximately 2.5% over recent months, while Trueflation’s real-time monitoring shows similar levels.
Oil prices breaking below $60 per barrel for West Texas Intermediate adds deflationary pressure. New home prices have declined for about 1 year, while existing home price inflation has dropped to 1.5%.
“We would not be surprised to see a real break in inflation once the tariffs have passed through in the next year,” Wood predicted.
Crypto Markets Lead Liquidity Downturn as ARK Buys Aggressively
Crypto markets demonstrated their sensitivity to liquidity conditions throughout November, with Bitcoin plunging below $90,000 for the first time since April.
The 30% drawdown from October’s $125,100 record triggered $254 million in single-day outflows from US Bitcoin funds on November 17.
Average spot ETF investors are now underwater, with a flow-weighted cost basis of around $89,600.
Wood emphasized crypto’s role as a liquidity barometer during the webinar. “It is interesting watching the crypto ecosystem really be a leading indicator when liquidity is ebbing and flowing,” she noted.
ARK Invest responded by accelerating purchases across crypto-linked equities, adding $42 million in Bullish, Circle Internet Group, and BitMine Immersion Technologies on November 20 alone.
The firm’s combined crypto exposure through its flagship ETFs surpassed $2.15 billion as of early November, spanning Coinbase, Robinhood, Circle, and Bullish holdings.
ARK maintains its highest crypto allocation in ARKF at 29%, followed by ARKW at 25.7% and ARKK at 17.7%.
Wood’s dip-buying strategy extends her conviction that “the restructuring of the financial ecosystem is also in the first inning.“
AI Bubble Concerns Dismissed
Wood firmly rejected suggestions that artificial intelligence investments have entered bubble territory, contrasting current conditions with the tech and telecom bubble two decades ago.
“In the tech and telecom bubble, sure, you had some value investors saying this doesn’t make sense. No one was listening to them,” she recalled.
Enterprise productivity gains remain elusive despite MIT research questioning corporate returns, but Wood emphasized that transformation “is hard work and it will take time.”
Palantir’s 123% growth in the US commercial business last quarter demonstrates a strategic imperative. “There is a strategic imperative now, and it will take time,” Wood stated.
Brett Swift, ARK’s director of research, explained how AI exposure fits total portfolio approaches increasingly adopted by institutional allocators. “If you don’t have a meaningful exposure there, you’re missing that idiosyncratic risk,” Swift argued.
Bitcoin Target Revised but Bull Case Remains Strong
Notably, Wood recently adjusted her 2030 Bitcoin price target downward from $1.5 million to $1.2 million after reassessing stablecoin competition in emerging markets.
“Stablecoins are usurping part of the role that we thought Bitcoin would play,” she explained on CNBC on November 6, referencing their rapid scaling to nearly $300 billion.
However, Strategy founder Michael Saylor disputed Wood’s competitive framing, arguing Bitcoin functions as “digital capital” while stablecoins operate as “digital finance” serving distinct purposes.
“No rich person wants to buy the currency instead of an equity or a real estate or a capital asset,” Saylor countered during a November 14 CNBC appearance.
ARK analyst David Bujnicki detailed the model revision, explaining that emerging-market safe-haven assumptions dropped to 20% of their original levels based on Chainalysis data.
Gold’s market capitalization surged from $17 trillion to $28 trillion, offsetting the downward revision, leaving Wood’s bull case at 1,100% upside from current levels.
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