New York-Bitcoin It’s not just a hedge against inflation, according to Cathie Wood, CEO of ARK Invest, but against something more disturbing: deflation driven by technological acceleration.
In a conversation with Anthony Pompliano at Bitcoin Investor Week in New York, Wood argued that traditional financial systems are not prepared for an upcoming “productivity shock” driven by artificial intelligence (AI), robotics and other exponential technologies. That shock, she said, will drive prices down rapidly, disrupt legacy business models and create what she called “deflationary chaos.”
“If these technologies are so deflationary, it’s going to be difficult for the traditional world – accustomed to 2% to 3% inflation – to adapt,” Wood said. “They will have to adopt these technologies faster than expected.”
That deflation, in his opinion, will not come from an economic collapse, but from advances that reduce costs and boost production. He cited data showing that AI training costs fall by 75% per year and inference costs (what it takes to generate an AI response) fall by up to 98% annually. As a result, companies are becoming much more productive with fewer inputs, resulting in lower prices.
Wood said the Fed is misinterpreting this type of innovation-driven deflation, which still relies on backward-looking data. “They could overlook this and be forced to respond when there is more killing,” he warned.
In that scenario, where traditional financial institutions are surprised, the appeal of bitcoin becomes clearer.
“Bitcoin is a hedge against inflation and deflation,” he 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 that problem.”
Bitcoin, he argued, offers a trustless alternative that is insulated from the fragility of traditional finance. As central counterparties and legacy institutions come under pressure, bitcoin’s decentralized architecture and fixed supply become strategic advantages.
Wood also noted that bitcoin’s simplicity contrasts with the complexity of layered financial systems, which can face pressure as deflation compresses margins and undermines debt-based growth models.
“This is the opposite of the technology and telecommunications bubble,” he said. “Back then, investors threw money at technology when it wasn’t ready. Now it’s real, and we’re on the other side of the bubble.”
He highlighted that ARK wallets have been built around the convergence of disruptive technologies, including blockchain, for years. The firm remains one of the largest holders of Coinbase (COIN) and Robinhood (HOOD), among many other allocations in crypto companies.
While markets remain volatile, Wood argued that bitcoin (and innovation-focused investments in general) will benefit as the economic narrative shifts from inflation to productivity-driven deflation.
“The truth will prevail,” he said. “We believe we are on the right side of change.”
