Cathie Wood Predicts Crypto Liquidity Crunch Will Reverse Within Weeks

Core Viewpoint - ARK Invest CEO Cathie Wood predicts a reversal of the liquidity squeeze affecting crypto and AI markets within weeks, driven by anticipated Federal Reserve policy shifts before year-end [1][2] Group 1: Federal Reserve Policy Expectations - Wood expects the Federal Reserve to end quantitative tightening at its December 10 meeting, which will alleviate one of the liquidity constraints [3] - The conclusion of the government shutdown has returned funds to circulation, further easing liquidity pressures [3] - Wood anticipates another interest rate cut in December as economic data shows signs of weakening [4] Group 2: Current Market Conditions - Bitcoin is currently trading below $88,000, down from an October peak of $126,000, with crypto-linked equities experiencing their sharpest monthly declines since early 2024 [2] - The crypto market has shown sensitivity to liquidity conditions, with Bitcoin dropping below $90,000 for the first time since April, leading to significant outflows from US Bitcoin funds [6] - Average spot ETF investors are currently underwater, with a flow-weighted cost basis around $89,600 [6] Group 3: Inflation and Economic Indicators - Oil prices have fallen below $60 per barrel, contributing to deflationary pressures, while new home prices have declined for about a year [5] - Existing home price inflation has dropped to 1.5%, indicating a potential break in inflation as tariffs are expected to pass through in the next year [5] - Ten-year Treasury yield inflation expectations have decreased to approximately 2.5% [4] Group 4: Crypto as a Liquidity Indicator - Wood emphasized that the crypto ecosystem serves as a leading indicator of liquidity conditions, reflecting changes as liquidity ebbs and flows [7]