Cathie Wood: NFTs, DeFi, digital wallets will be important and huge opportunities

- Digital property rights and DeFi related to NFTs that underpin Web3 "will become extremely important," according to Cathie Wood, CEO of Ark Invest.

- Wood asserts that the long-term value of a digital asset will come from its utility — a message that may be difficult for many institutional players to digest.

Ark Invest CEO Cathie Wood said Tuesday that digital property rights and DeFi related to NFTs that underpin Web3 “will become extremely important.”

"DeFi has done well, and we're very impressed with the strength of the ecosystem," Wood said on CNBC's "Squawk Box," adding that the "token revolution" around NFTs is still in its infancy.

NFTs are hugely popular in 2021. People create, collect, and trade NFTs, making millions of dollars, and some of them hope to profit in the future. But experts remain skeptical that NFTs are a good investment.

Last week, billionaire Bill Gates revisited past criticism of digital assets at a climate conference hosted by tech blog TechCrunch, calling cryptocurrency projects such as NFTs a scam “based on bona fide theory.” .

"Obviously, expensive digital images of monkeys will greatly improve the world (obviously referring to one of the blue-chip NFT projects, BAYC)," Gates quipped. He said he was neither bullish nor bearish on the asset class. In addition, Gates defended his digital banking efforts backed by charitable foundations, which he believes are "hundreds of times more efficient" than cryptocurrencies.

Earlier, Bill Gates said that Bitcoin consumes too much energy and is not conducive to the ecology of the earth.

The proliferation of NFTs is still a new phenomenon, but there has been a lot of monetary transactions between collectors. For example, sales of NFT collectibles have surpassed $6.2 billion since 2017, while digital art sales have exceeded $1.9 billion, according to NonFungible, which tracks historical non-NFT sales data.

“We believe that digital property rights — what NFTs stand for — are going to be extremely important.” Wood adds that her background in economics has taught her the value of property rights in helping people lift themselves out of poverty.

Creators in the NFT space have long been doing the same, and investors like Wood are quick to assert that the long-term value of digital assets will come from their utility. For institutional investors, this may be a difficult message to digest.

Meanwhile, collectible art, such as the famous blue-chip NFT project Bored Ape Yacht Club (BAYC), has taken center stage in the early NFT space. Over the past few months, however, the value of these NFT collectibles has fallen sharply. Both Bored Ape Yacht Club and another blue-chip NFT project, Crypto Punks, have seen sharp price drops recently.

Some tech giants believe more pain is on the way. "If you assume Web3 is 10x overvalued, then It's been corrected 5 times, so it actually has a lot of room for improvement."

But Wood's remarks suggest she's not deterred by the latest sell-off.

"We believe that if the ecosystem is consolidated, that's not a bad thing. We think digital wallets will be one of the most important outcomes for the industry. They're effectively bank branches in our pockets," Wood said. These are going to be huge opportunities.”

The innovation-focused investor will also struggle in 2022 as disruptive tech companies she favors are among the biggest losers this year amid rising interest rates. Its flagship active fund, the Ark Innovation ETF (ARKK), has fallen 52% so far this year and is down 66% from an all-time high set in February 2021.

Still, Wood said her clients are mostly sticking with her, and new money is flowing in as investors seek diversification in a down market. ARKK saw inflows of more than $180 million in June, according to FactSet.

Meanwhile, cryptocurrency investors continue to grapple with aggressive interest rate hikes and a worsening liquidity crunch that has left major players in financial trouble. The broader crypto space is also still reeling from last month’s $60 billion collapse of two major tokens (LUNA and UST).

“A lot of people expected a systemic knock-on effect from the Terra-Luna crash, and we did see some of that, but ethereum has held up pretty well so far,” Wood said of the matter.

Earlier this month, crypto lending platform Celsius, which promises high yields for users who deposit cryptocurrencies, abruptly announced a suspension of withdrawals, fueling concerns about cryptocurrencies. The subsequent Three Arrows Capital incident further spread the panic.

On June 27, crypto broker Voyager Digital announced a default notice to Three Arrows Capital for failing to pay a previously disclosed loan of 15,250 BTC and 350 million USDC.

Voyager Digital plans to seek compensation from Three Arrows Capital and is discussing available legal remedies with the company's advisors, having retained Moelis & Company as financial advisor.

source：CNBC