New York — Bitcoin is not just a hedge against inflation, according to Cathie Wood, CEO of ARK Invest, but against something more disruptive: deflation driven by technological acceleration.
In a conversation with Anthony Pompliano during Bitcoin Investor Week in New York, Wood argued that traditional financial systems are unprepared for an upcoming “productivity shock” fueled by artificial intelligence (AI), robotics, and other exponential technologies. This shock, she said, will drive prices down rapidly, upend existing economic models and create what she calls “deflationary chaos.”
“If these technologies are so deflationary, it will be difficult for the traditional world – accustomed to 2-3% inflation – to adapt,” Wood said. “They will have to adopt these technologies faster than expected.”
According to her, this deflation will not come from an economic collapse, but from progress that will reduce costs and increase production. She cited data showing that AI training costs are falling by 75% per year and inference costs (what it takes to generate an AI response) are falling by up to 98% per year. As a result, businesses become much more productive with fewer inputs, leading to lower prices.
Wood said this type of innovation-driven deflation is misinterpreted by the Federal Reserve, which always relies on retrospective data. “They could miss this and be forced to respond when the carnage continues,” she warned.
In this scenario – where traditional financial institutions are caught off guard – the appeal of bitcoin becomes clearer.
“Bitcoin is a hedge against inflation and deflation,” she said. “The chaotic part of this is…disruption everywhere,” referring to the underperformance of software-as-a-service stocks and emerging counterparty risks in areas such as private equity and private credit. “Bitcoin doesn’t have this problem.”
Bitcoin, she argued, offers a trustless alternative, insulated from the fragility of traditional finance. As central counterparties and traditional institutions come under pressure, bitcoin’s decentralized architecture and fixed supply become strategic advantages.
Wood also noted that the simplicity of Bitcoin contrasts with the complexity of multi-tiered financial systems, which can come under pressure as deflation squeezes margins and undermines debt-based growth models.
“It’s the opposite of the tech and telecommunications bubble,” she said. “Back then, investors were investing in technology when it wasn’t ready. Now it’s real – and we’re on the other side of the bubble.”
She highlighted that ARK’s portfolios have been built for years around the convergence of disruptive technologies, including blockchain. The company remains one of the largest holders of Coinbase (COIN) and Robinhood (HOOD) among many other allocations to crypto companies.
As markets remain volatile, Wood argued that bitcoin – and innovation-driven investments in general – stand to benefit from the shift in economic discourse from inflation to productivity-driven deflation.
“The truth will prevail,” she said. “We believe we are on the right side of change.”
