Cathie Wood, the Founder, CIO, and CEO of ARK Investment Management, LLC, recently appeared on CNBC’s “Squawk Box” to discuss ARK Invest’s new venture into the crypto space. In collaboration with 21Shares, ARK is launching five new ETFs this week on Cboe Digital. These ETFs are a mix of Bitcoin futures and cash, Bitcoin futures and Ethereum futures, and a broader range of Bitcoin and equity-exposed companies.
During the interview, Wood highlighted the significant roles of Ethereum and other infrastructure players like Solana in the blockchain space. She emphasized that while Ethereum was initially faster and more cost-effective than Bitcoin, Solana has now surpassed Ethereum in these aspects.
Solana’s advantage over Ethereum
Understanding the technological underpinnings helps explain Solana’s advantage over Ethereum. Solana is known for its rapid transaction processing, achieving this with a unique Proof of History (PoH) and Proof of Stake (PoS) consensus mechanism. This combination allows Solana to process up to 65,000 transactions per second (TPS), making it highly efficient for real-time applications. In contrast, Ethereum initially used a Proof of Work (PoW) method, facing speed and congestion issues. Its upgrade to Ethereum 2.0, moving towards PoS, aims to improve scalability and transaction speed but is still in progress.
In terms of scalability, Solana’s architecture is designed to handle a high volume of transactions efficiently, leveraging PoH and PoS for high throughput and parallel processing capabilities. This makes Solana suitable for applications requiring large transaction volumes. Ethereum, on the other hand, struggled with scaling due to its PoW consensus but is transitioning to Ethereum 2.0 with a PoS mechanism and shard chains to boost scalability and reduce congestion. This transition is expected to enhance Ethereum’s scalability significantly, but the full realization of these benefits is pending.
Recent crypto rally
Cathie Wood’s statement comes at a time when the crypto market witnessed a resurgence, with the total market capitalization soaring to over $1.4 trillion. The turnaround comes amid expectations that U.S. regulators will soon approve an exchange-traded fund that invests in the cryptocurrency. This growth represents more than a 60% change from one year ago— according to CoinGecko.
Solana’s native token, SOL, has also seen a 51.7% price increase in the last 14 days, complementing a two-week upward trajectory, according to CoingGecko. On the other hand, Ethereum broke the $2,000 price mark in the last 14 days and increased by 10% during this period. Both digital assets haven’t reached their all-time highs yet, but the recent surge signifies a shift in market sentiment.
Notably, Bitcoin broke the $30,000 psychological threshold. However, the coin’s price remains 48% down from its all-time high (ATH) set on November 10, 2021. Traditionally, a rise in Bitcoin’s price suggests investor preference for the stability and security associated with Bitcoin, especially during market uncertainty.
Federal Reserve actions and macro conditions
Looking at the broader economic context, the Federal Reserve’s actions have influenced the crypto market. The Fed has since engaged in the fastest hiking cycle in 40 years to control inflation, shifting investor sentiment towards cryptocurrencies. In addition, the U.S. Federal Reserve initiated a significant program to oversee banks’ activities in the cryptocurrency sector in August. This program doesn’t introduce new rules for crypto banking but clarifies how the Fed will conduct its oversight.
Under this “novel activities supervision program,” experts in digital assets will work with regular supervisors to oversee transactions involving cryptocurrencies, particularly focusing on stablecoins. Banks must gain preapproval for activities involving stablecoins, demonstrating their ability to manage associated risks, including vulnerabilities to money laundering, customer runs, and hacking threats.
The Fed’s announcements reinforce earlier crypto guidance and are aligned with their intention to maintain a substantial barrier between traditional banking and the crypto sector. However, they also encourage banks to continue experimenting with digital assets under close supervision. This approach aims to balance innovation in financial services with regulatory oversight. The level of supervision will vary depending on each bank’s level of engagement in these novel activities, ensuring that the regulations and supervision foster innovations that improve access to and delivery of financial services.
