New York – Bitcoin is not just a hedge against inflation, according to ARK Invest CEO Cathie Wood, but against something more disruptive: 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 unprepared for a coming “productivity shock” driven by artificial intelligence (AI), robotics and other exponential technologies. That shock, she said, will push prices down rapidly, upend legacy business models and create what she called “deflationary chaos.”
“If these technologies are so deflationary, it will be difficult for the traditional world — used to 2% to 3% inflation — to adjust,” Wood said. “They will have to embrace these technologies faster than expected.”
That deflation, in her view, will not come from economic collapse, but from breakthroughs that 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 as much as 98% annually. As a result, companies become far more productive with fewer inputs, leading to lower prices.
Wood said this kind of innovation-led deflation is being misunderstood by the Federal Reserve, which still relies on backward-looking data. “They could miss this and be forced to react when there is more carnage out there,” she warned.
In that scenario – where traditional financial institutions are caught flat-footed – bitcoin’s appeal becomes clearer.
“Bitcoin is a hedge against inflation and deflation,” she said. “The chaotic part of this is … disruption everywhere,” referring to underperformance in 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, she argued, offers a trustless alternative insulated from the fragility of traditional finance. As CCPs 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 could face pressure as deflation compresses margins and undermines debt-based growth models.
“This is the opposite of the tech and telecom bubble,” she said. “Back then, investors were throwing money at technology when the technologies weren’t ready. Now they’re right – and we’re at the back of the bubble.”
She emphasized that ARK’s portfolios 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 businesses.
While markets remain volatile, Wood argued that bitcoin — and innovation-focused investments more broadly — could benefit as the economic narrative shifts from inflation to productivity-driven deflation.
“Truth will win,” she said. “We believe we are on the right side of change.”
