Interview with Cathie Wood: Benign deflation is coming, the Fed will cut interest rates, and Bitcoin is still in the bottoming-out phase of a bull market.

Compiled & edited by: Yuliya, PANews

Amid market volatility and low sentiment, are disruptive innovations being collectively "oversold"? In her latest podcast, Cathie Wood, founder, CEO, and CIO of ARK Invest, points out that the current market pricing of innovative assets may be "unprecedentedly inefficient," with valuations far below those during the dot-com bubble. Meanwhile, genuine long-term opportunities are being obscured by investor fear.

In this interview, Cathie Wood recounts ARK's early experience of allocating Bitcoin starting in 2015, explaining how Bitcoin went from being ridiculed as a fringe asset to being allocated by institutions. She also provides an in-depth analysis of the rise of stablecoins, the change in attitude of BlackRock founder Larry Fink, the entry of traditional finance, the prospects of DeFi and RWA tokenization, and looks forward to the deep integration of blockchain with AI, machine payments, medical research and development, and other fields.

PANews has compiled and edited the transcript of this interview.

I. Integration of 5 major platforms and 15 technologies

Host (Robbie/Andy): You've proposed five major innovative platforms, which have spawned fifteen technologies, and these technologies are now converging. Before delving into digital assets and public blockchains, could you first give a general overview of your views on disruptive innovation?

Cathie Wood: Absolutely. The seeds of everything that's happening today were sown early in my career, in the 80s and 90s. The tech and telecom bubble of the late 90s was simply caused by investors blindly pouring money into anything related to .com or the internet. Unfortunately, the technology wasn't quite ready, and the costs were too high.

When AWS emerged in 2006, I remember trying to explain cloud computing to investors and advisors. It was a very foreign concept to them.

The real major breakthrough in AI is still many years away:

In 2012, deep learning achieved a breakthrough;
In 2017, the Transformer architecture emerged, which actually led us to ChatGPT and natural language programming.

So the problem back then was that too much capital chased too few opportunities too early.

We've experienced a bubble burst. Today, the situation is exactly the opposite. Now, five major innovation platforms have reached a stage where they can be truly deployed at scale, involving fifteen different technologies that are converging. Yet, investors are extremely fearful.

As a fund manager, I would much rather work in today's environment than during the tech and telecom bubble. That was too crazy.

Many people may find it hard to believe, but I believe today's valuations are far lower than during the bubble era. More importantly, the technology is ready, and costs are falling at an astonishing rate. This means these technologies will be used by more and more industries and more and more individuals.

Host: Is this also the reason why you founded ARK in 2014?

Cathie Wood: Yes. I founded ARK in 2014 because of the bursting of the tech and telecom bubble, especially after the 2008-2009 global financial crisis, when institutional investors became extremely risk-averse. Risk aversion wasn't as strong in the retail world, but it was very pronounced on the institutional side.

At the same time, I've seen the entire asset management industry move towards passivity, which has fueled the ETF boom. Even in active management, fund managers are increasingly relying on benchmark indices. They often use benchmarks as a guide when selecting investment ideas.

We don't do that. We screen investment ideas based on our research, especially original research.

Therefore, we focus on:

Five major innovation platforms;
Fifteen key technologies;
And the integration of these technologies.

I believe the research framework itself must be reorganized. Traditional financial industry research is typically divided into: industry, sector, and sub-industry.

Many companies have five consumer analysts and five healthcare analysts. But we believe that to properly and efficiently grasp innovation, research teams must be built around those fifteen technologies.

The reason is simple: these technologies will cross industry boundaries and span different sectors. You must start with the technology itself, rather than limiting your responsibilities to isolated industry silos.

Host: Why are investors so fearful? Is it because they don't clearly understand this organizational structure and can't truly grasp the convergence of technologies?

Cathie Wood: I think the convergence of technologies is indeed confusing. Tesla is a prime example. Most research directors delegate Tesla to automotive analysts. But it should at least be handled by technology analysts. More precisely, it should be a collaborative study by analysts from three different technology areas:

Robot Analyst;
Energy storage analyst;
AI analyst.

In reality, Tesla has been handed over to experts in internal combustion engines and human-driven cars. We are leaving that world behind, moving towards electrification and autonomous driving. This is one source of the confusion.

The rapid pace of AI development and its impact on so many industries is creating a disruptive experience. Research directors need time to consider: How can I effectively organize my team to understand what's happening?

They need to organize their research according to technology, and they also need a highly collaborative environment. But in the world of institutional investing, at least where I used to work, if a car analyst is in charge of a stock, no one else should touch it.

This world must change. Because these technologies are converging, analysts must work together to understand the potential behind these stocks.

II. Early Explorations of Bitcoin

Host: The story of digital assets clearly began with Bitcoin. You founded ARK in 2014, when Bitcoin already existed but was still finding its footing. How did you initially view it? Was it already suitable for institutional asset allocation at that time?

Cathie Wood: Not then. Actually, at my previous company, we started paying attention to and discussing Bitcoin. I brought the chief analyst who was most interested in cryptocurrencies at the time to ARK, who is now our chief futurist, Brett Winton.

When ARK was founded in 2014, we actually only had four innovation platforms. We merged AI and blockchain technologies into the "Next Generation Internet" (which is also the current name of our ARKW fund). At that time, AI had gained more attention due to breakthroughs in deep learning, but it was still very young; we were very interested in blockchain technology, but we didn't know if it was worthwhile as a separate direction, and people might just stare blankly at it.

But we were very interested. In 2015, we collaborated with Art Laffer on the first white paper on Bitcoin. We posed the question: Can Bitcoin fulfill the three functions of money (medium of exchange, store of value, and unit of account)? Art Laffer is not only known for the Laffer Curve in the field of fiscal policy, but he is also a monetary scholar, and his mentor was Nobel laureate in economics Robert Mundell.

From an economic perspective, he was incredibly helpful. He told me, "This is what I've been waiting for since the U.S. closed the gold window in 1971." I asked him how big that idea could be. He countered by asking how large the U.S. monetary base was, at the time, $4.5 trillion (over $6 trillion today). Meanwhile, Bitcoin's "network value" (market capitalization) was only $6 billion. Think about it, $6 billion versus trillions.

So I personally invested immediately.

Host: How did ARK gain Bitcoin exposure for its clients at that time?

Cathie Wood: We started looking for the best way to get exposure for our clients, but we had to apply for permits. We needed to go through:

New York Stock Exchange;
SEC;
And some regulatory obstacles or bottlenecks.

Later we found GBTC.

At the time, Bitcoin was priced at $250. We established a position in the summer of 2015, when Greece was threatening to leave the EU, and we noticed that Bitcoin would rise whenever there were such headlines. It behaved like a tool for hedging against disaster. We realized that it could be not only a risk-on asset but also a risk-off asset.

III. Tokenization, the Rise of Stablecoins, and the Future of DeFi

Host: Now that we're in 2026, we're seeing ETFs, stablecoin adoption, tokenized assets, and large institutions launching products and stablecoins. What are your thoughts on the current state of institutional adoption? Why is there so much apathy and disappointment within the crypto-native community, while newly entering large institutions seem more optimistic?

Cathie Wood: A few things are happening right now. When we first established our position in 2015, we were met with a lot of ridicule, with many people thinking it was just a marketing gimmick. But it was precisely this widespread ridicule and dismissiveness that convinced me we might have discovered a huge opportunity.

We now have a global monetary system, and Bitcoin occupies that space; the DeFi field is dominated by Ethereum and Solana, while Hyperliquid has also brought some challenges.

Regarding institutional interest, I think we need BlackRock CEO Larry Fink to change his mind. He was once the leader of the world's largest asset management company, yet he publicly denigrated Bitcoin. But he later underwent a dramatic transformation, stemming from his vision of "tokenizing everything."

He finally understood that the internet didn't have a financial layer when it was first established because nobody envisioned business and investment happening on it. He saw the future of tokenization, which was crucial for institutional investors and product development experts. I owe that to him. Once he changed his attitude, he gave the entire industry a license: "If even he says it's important, I might miss out if I don't get on board." And with BlackRock having a large asset management technology platform like Aladdin, his shift in attitude had a profound impact.

Host: What role do stablecoins play in this?

Cathie Wood: I think the evolution of stablecoins is crucial for DeFi. The most surprising thing for me from the early days of Bitcoin to now is the development of fiat-backed stablecoins.

In the early days of the crypto ecosystem, this actually went against the spirit of the time. But now you see that Bitcoin OGs fully support stablecoins.

For example, Tether's Giancarlo and Paolo are clearly strong supporters of stablecoins. Moreover, from OG's perspective, they were among the earliest supporters.

I believe they introduced the concept of stablecoins to the world. Stablecoins serve as a bridge from traditional finance to DeFi.

Importantly, we initially thought Bitcoin would take on the role that stablecoins are now playing, especially in emerging markets.

But even in emerging markets, the Bitcoin community now sees stablecoins as a humanitarian stepping stone into the crypto world.

Why is it called humanitarianism?

Because most people in emerging markets cannot afford the daily volatility of Bitcoin and other crypto assets. Their lives are closer to a "hands-off" existence. As their wealth grows, we also agree that they will shift from stablecoins to more investments within the crypto ecosystem.

Therefore, stablecoins are another major surprise and have become a sliding path for DeFi.

Host: Will the stablecoin market be a winner-takes-all market?

Cathie Wood: This is a big question. We've also discussed it with CZ. Network effects suggest the answer is yes.

I believe the delays in the GENIUS Act and CLARITY Act have given Tether and Circle, i.e., USDT and USDC, more time to benefit from network effects. This is somewhat ironic. Regulation should have spurred the emergence of more stablecoins, but the regulatory delays have instead allowed existing stablecoins to gain even stronger network effects than before.

CZ believes stablecoins will surge, and our team (Lorenzo, David, Ray) agrees. But regardless of whether they surge or not, everyone believes that consolidation will eventually occur, and based on network effects, only a few winners will remain.

Host: You've mentioned that the global tokenized asset market could exceed $11 trillion by 2030. With more and more assets going on-chain and entering DeFi protocols, do you agree with this view? Where do you think value is most likely to flow in DeFi applications and networks?

Cathie Wood: We tend to agree with you. In the world of innovation, there are typically two types of participants.

The first category consists of purely emerging players. They are faster, more creative, and more agile.
The second category is traditional players. They will first embrace new technologies to reduce costs, improve efficiency, and increase productivity.

In the traditional world, the companies that most actively and thoughtfully adopt new technologies will eventually integrate traditional industries.

When Amazon emerged, it was during the dot-com bubble, and the prevailing view was: "My God, traditional retail is going to be destroyed." Certainly, many boutiques were indeed replaced and disintermediated by the internet.

Walmart leveraged the internet to build its online business (by acquiring Jet), which later expanded rapidly, capturing market share from many smaller traditional retailers and consolidating traditional sectors.

Meanwhile, Amazon, as a giant, is also growing rapidly, and the two coexist. Walmart is now actively entering the drone delivery market and has made progress through close cooperation with regulators, while Amazon has fallen behind in this area due to some missteps.

Host: Will a similar pattern emerge in the crypto world?

Cathie Wood: In the crypto world, we'll also see traditional players embracing this technology. JPMorgan CEO Jamie Dimon was once a major opponent of Bitcoin. But he's now having his technical team and client demands overturn his personal biases.

Regarding the development of DeFi, I believe pure crypto projects will benefit from network effects, such as Ethereum, Solana, and Hyperliquid. We will bet on them. We have already purchased some Digital Asset Trusts (DATs) for our ETF, such as Bitwise and Solana-related products. We know that too many DATs have been created in the market, and there will be significant weeding out, so we have been cautiously re-entering or, where platforms allow, shifting to pure exposure to Ethereum and Solana.

Some platform providers don't want us to hold Bitcoin ETF, or Ether or Solana ETF, in our flagship fund. Therefore, we have to comply with their requirements. You will see us obtain exposure through other means.

The economic value and value capture of L1 and L2 are still under discussion, and we are closely monitoring the situation. Nevertheless, we remain committed to several core networks. If we include Bitcoin, especially given our observations of wrapped Bitcoin and its migration to other platforms, I believe it can be categorized into the "Big Four": Bitcoin, Ethereum, Solana, and Hyperliquid.

Host: If $11 trillion in assets are indeed on-chain by 2030, our mental model of blockchain and DeFi applications will need to change. They will not only handle crypto assets, but will also carry stocks, funds, and other off-chain assets, becoming the backbone of the real economy, not just the crypto economy.

Cathie Wood: Yes, I'd like to add something. Art Laffer once told me that if traditional finance hadn't entered and "disrupted" the so-called purity of the crypto community, you probably wouldn't be seeing such strong growth as we're about to witness. He was very excited when he heard we were launching a Bitcoin spot ETF, saying it was absolutely necessary if this new world were to truly take off and eventually dominate.

IV. Macro liquidity, Bitcoin cycle, and the positioning of "digital gold"

Host: We're in the midst of geopolitical turmoil, stock markets are hitting new highs, and Bitcoin is hovering around 75K. Global liquidity and M2 are both rising. What are your thoughts on the current macroeconomic liquidity dynamics? AI and upcoming IPOs are attracting a lot of attention; has this caused a lag in the crypto market?

Cathie Wood: In a letter I wrote earlier this year, I analyzed the correlations between asset classes. Many people assume that Bitcoin is digital gold, and therefore must be highly correlated with gold. But that's not the case. From 2019 (when institutional interest began to increase) until now, the correlation between gold and Bitcoin is only 0.14.

However, in the past two cycles, gold has rallied before Bitcoin. We believe the same thing is happening now. Although Bitcoin has recently fallen relative to gold, the bottom is consistently rising from the long-term trendline. Therefore, we believe Bitcoin's bull market remains intact. While we have experienced a so-called bear market, compared to the 85% or 95% drops of the past, this 50% drop is already a victory.

Host: So you still believe Bitcoin will reach new highs?

Cathie Wood: We believe Bitcoin will reach a new all-time high in this cycle. Our base case is $730,000 by 2030, and our bullish assumption is $1.5 million. I've been criticized for saying stablecoins have usurped some of Bitcoin's role, but people overlooked the fact that gold was ralliing at the time, meaning Bitcoin's role as a store of value was also growing.

In fact, these two factors cancel each other out. The stronger influence comes from the price of Bitcoin as a percentage of its price movement relative to gold.

Therefore, we believe that we are currently in the process of bottoming out.

David Puell, who leads our on-chain analysis, believes that in the event of an absolute surrender, the price could reach a "last line of defense" range: $50,000 to $55,000.

But I'm skeptical, because looking at the current performance of Bitcoin and other assets, it's not necessarily going to fall that low.

Host: What are your thoughts on the Federal Reserve and inflation?

Cathie Wood: Everyone's saying the Fed is too hawkish right now. But actually, the federal funds rate has already fallen by 175 basis points. I think inflation will be significantly lower than expected. For example, PepsiCo's Frito-Lay cut its price by 15% about three months ago, and today they announced sales far exceeded expectations. In a low-inflation world, price cuts lead to increased sales per unit.

This is especially true in the tech industry, where we're witnessing massive deflation. AI training costs are falling by 75% annually, and AI inference costs (such as the cost of ChatGPT answering questions) are decreasing by 85% to 95% annually. This will bring about a huge wave of "benign deflation."

So-called "benign deflation" refers to strong unit growth driven by price reductions. This is why we expect real GDP growth to accelerate. When the Federal Reserve sees inflation declining, we believe it will cut interest rates.

Host: What inflation indicators do you pay attention to?

Cathie Wood: I don’t know if you’re interested in Truflation, which is a measure of consumer price inflation based on blockchain and measures tens of thousands of products in real time.

Even with the recent trend in gasoline prices, Truflation's inflation rate is only 1.8%. It has previously been below 1%.

Core inflation is only 1.3%.

Over the past two and a half to three years, inflation has been hovering between 2% and 3% according to various measures, including truuflation.

However, truuflation suggests that these inflations will resolve downwards. If this happens, we believe the Federal Reserve will ease monetary policy.

Another reason is the unemployment rate. Although the overall unemployment rate is low, if you break it down, you'll find that entry-level jobs are being impacted.

The company did not lay off a large number of employees, but it also did not hire much.

So the youth unemployment rate, which is for the 16- to 24-year-old group, is now 8.5%. It used to be as high as 11%, and now it's 8.5%.

This indicates a slack in the employment system, which is also dragging down wage growth.

This is interesting. If you look at any wage metric, you'll see wage growth slowing while productivity is accelerating. So why is the Federal Reserve implementing easing measures?

Because the demand for money is increasing relative to the supply, and this is related to unit growth, the Federal Reserve's role is to balance or adapt to real economic growth.

V. Four-year cycle, ETF holders and the flash crash on October 10th

Host: A new Federal Reserve Chairman is about to take office. Recently, it was discovered that his portfolio includes some crypto funds, which has excited the market. Do you generally believe the Fed will identify "good deflation" and support the market through interest rate cuts or quantitative easing? How much impact do you think this will have on digital assets? How quickly? Do you believe the four-year Bitcoin cycle is still in effect, or do you think a dovish Fed stance will drive asset prices up sooner?

Cathie Wood: I think it's very insightful to look at Bitcoin ETFs. We need to see just how committed these ETF holders are. They've been remarkably steadfast during this downturn.

If you're an institutional investor, you start learning about this new asset class, hear about the four-year cycle, and then see Bitcoin drop by 50%. As a traditional asset manager, you'd consider this a severe bear market. But some institutions see it as an opportunity to lower their average cost. While some investors choose to exit the market, more institutions are gradually understanding this new asset class and entering the market.

Whether Bitcoin has entered a four-year cycle remains inconclusive. The flash crash on October 10th triggered automatic deleveraging in the market, a phenomenon familiar to investors acquainted with the DeFi ecosystem. As a fund manager, I noticed the automatic deleveraging occurring on the Binance platform, and this phenomenon was not caused by Binance; I subsequently clarified this publicly.

Furthermore, the tariff turmoil triggered renewed market volatility, and a software glitch on Binance led to a series of automatic deleveraging events. Some investors who initially believed they had hedged their risks discovered, after trading on both exchanges, that they hadn't truly hedged, resulting in significant losses. The shakeout may have reached $28 billion or $30 billion. However, we believe the shakeout is over.

Therefore, the market is currently in a bottoming-out phase, and multiple factors are converging to influence its future trend:

The cleaning is over;
Institutional support exists;
Perhaps the four-year cycle still exists;
Perhaps because the institution is learning, we are accelerating the four-year cycle.

However, I believe that with increased liquidity, the market will usher in the next major boom.

Host: You also mentioned a more economic point: the velocity of money.

Cathie Wood: We're seeing the money growth rate rise, currently at 4.9%. Nominal GDP is around 5%, so money growth is basically adjusting to nominal GDP.

War can slow the velocity of money. The velocity of money refers to how quickly money circulates. If it increases, it amplifies the 4.9% impact on economic activity. If it decreases, it becomes a drag.

Therefore, this may have caused some instability and changes in the speed of circulation. We will need to observe this in the coming months.

VI. The Integration of Blockchain with AI, Business, and Healthcare

Host: What are your thoughts on the convergence of blockchain, cryptocurrency, DeFi protocols, and broader disruptive technologies such as AI or healthcare?

Cathie Wood: You've probably heard the term "Agentic AI." In the future, we'll have many chatbots working for us. Our crypto team is a great example; they use Claude to assist with report writing. With AI, they reduced the time spent writing our quarterly Bitcoin and DeFi reports—which contain numerous charts and lengthy documents—by 75%. This freed up tremendous productivity, allowing them to conduct more in-depth research.

Following the line of thought of Agentic AI, at some point they will let the robot complete these reports on its own.

This is where we need a payment system.

We have to pay Claude, or the company that provides the data. It will all be machine-to-machine payments.

What could be better suited to meet this need than an internet finance system (blockchain)? If we are to unlock these productivity gains, we must eliminate intermediaries in traditional finance.

Host: Will agentic commerce also need a blockchain payment ecosystem?

Cathie Wood: That's true. I hate shopping, and in the future I'll have a personal shopping bot that knows my style, one that can even be trained by my current personal shopper, Lillian. I'll never have to go into a store again. But a proxy payment ecosystem will be essential, and we believe it will be based on blockchain.

Host: What about the medical field?

Cathie Wood: We're seeing the rise of "self-driving labs" in drug discovery and clinical trials. These labs operate without human intervention, driven by DeFi, blockchain technology, and peer-to-peer networks. So, yes, agent-like AI powered by a blockchain-based payments ecosystem will take over the future.