NFTs and digital wallets will become huge opportunities
Cathie Wood, Managing Director and Chief Investment Officer, Ark Invest, speaks at the Milken Institute Global Conference on May 2, 2022 in Beverly Hills, California.
Patrick T. Fallon | AFP | Getty Images
Ark Invest CEO Cathie Wood said on Tuesday that the digital property rights tied to non-fungible tokens (NFTs) and decentralized finance (DeFi) that have underpinned the emergence of Web3 “are going to become incredibly important.”
“DeFi has taken off and we’re impressed with the robustness of the ecosystem,” Wood said on CNBC’s “Squawk Box,” adding that the “symbolic revolution” surrounding NFTs is “in its infancy.”
NFTs – unique digital assets, like artwork and sports trading cards, that are verified and stored using blockchain technology – have exploded in popularity in 2021. People create, collect and trade NFT for millions of dollars, some hoping to profit from it in the future. But experts are still skeptical that NFTs are a good investment.
Speaking at a TechCrunch conference on climate change last week, Bill Gates described the crypto and NFT phenomenon as something that’s “100% based on some bigger silly theory”, referring to the idea that overvalued assets will rise in price when there are enough investors willing to pay more for them.
Microsoft’s billionaire co-founder joked that “expensive digital images of monkeys” would “make the world a whole lot better”, referring to the much publicized bored monkeys.
The surge in NFTs is still fairly new, but massive sums of money have already traded hands between collectors. Since 2017, for example, NFT collectibles have generated more than $6.2 billion in sales while digital art has generated more than $1.9 billion, according to NonFungible, which tracks historical sales data. of NFTs.
“We think digital property rights, which NFTs represent, are going to become extremely important,” Wood said, adding that his economic journey has taught him the value of property rights when it comes to getting people out. of poverty.
The creators of the NFT space have long made the same case, and investors, like Wood, have been quick to assert that the long-term value of digital assets will come from their utility. It was a message that was difficult for institutional investors to digest, as collectible works of art, such as the prominent Bored Ape Yacht Club, took center stage in early NFTs. These NFT collections have seen a significant drop in value over the past few months. Bored Ape Yacht Club and the equally high-profile Crypto Punks have recently seen prices drop precipitously.
Some tech icons think more pain is coming. Eric Schmidt, former executive chairman and CEO of Google and co-founder of Schmidt Futures, told CNBC’s “Squawk Box” from the Aspen Ideas Festival on Tuesday, “If you assume Web3 has been overhyped 10 times and it’s patched 5 times, there’s a few more to do.”
But Wood’s comments suggest she’s not deterred by the recent sell-off.
“We are confident and we believe that the ecosystem, if it consolidates, is not a bad thing. We believe that digital wallets are going to be one of the most important results here. They are in fact branches banks in our pockets,” Wood said. said. “These will be huge opportunities.”
The innovation-focused investor has had a tough 2022 as its disruptive tech darlings have been among the biggest losers this year from rising interest rates. Its flagship active Ark Innovation ETF (ARKK) is down 52% year-to-date, down 66% from its record high set in February 2021.
Still, Wood said her clients were mostly sticking with her and new money was coming in as investors sought to diversify in a bear market. ARKK saw more than $180 million in inflows in June, according to FactSet.
Meanwhile, crypto investors also continue to face aggressive rate hikes and a worsening liquidity crunch that has pushed major players into financial trouble. The wider space is also still reeling from the fallout from the $60 billion collapse of two major tokens last month.
“A lot of people expected the Terra-Luna collapse to cause a systemic chain reaction and we’re seeing a bit of that, but so far Ethereum has held up very well,” Wood said of the post. of the debacle.
Adding to broader crypto concerns, Celsius, a crypto lending platform that promised high returns to users depositing their cryptocurrency, suspended withdrawals earlier this month. On Monday, high-profile crypto hedge fund Three Arrows Capital defaulted on a loan worth over $670 million from Voyager Digital.
— CNBC Yun Li contributed to this story.