According to a top tech investor, cryptocurrencies such as bitcoin will become so widespread and valuable that all money transfers are going to be free of charge.
The CEO of ARK Invest, Cathie Wood, said that the internet does not havebuilt-in in payments system because it was not conceived as a place for commerce. Bitcoin and the other cryptocurrencies are “helping to solve that problem and cut out a lot of friction.”
For example, she stated, 20% or more of money transfers in the region between the South Korea and the Philippines are taking place over bitcoin, “but the sender and receiver don’t know it.”
ARK Invest manages $1.7 billion of assets in funds that are focused on disruptive technology. Before ARK, Wood spent 12 years as chief investment officer of global thematic strategies at Alliance Bernstein, where she managed $5 billion.
Traditional money transfer services like that of Western Union charge 7 to 8% per $100 of the money that is transferred from one country to another, a huge amount for migrant workers who want to send money home to their families. “That’s a huge cut, right?” Wood argued. However, if cryptocurrency transfers can put pressure on the traditional companies, those expensive transmission fees may not exist for much longer.
“Right now, you pay the conversion fee from fiat currencies into crypto and back again and those [rates] are 2 to 3 percent. That’s a lot better already,” continued Wood. “But we think that the data is going to be so valuable that money over IP is going to be free because the transactions will be the information that companies want to get after.”
According to data from industry website CoinDesk, on Friday, Bitcoin hit a record high of $5,856.10. According to Coinmarketcap.com, its market capitalization, which is the entire value of all the bitcoin in circulation, reached $96.7 billion. That exceeded the market capitalization of major stocks like Morgan Stanley and Goldman Sachs.
If it were a stock at its present size, bitcoin would be the 15th biggest component of the Nasdaq and the 58th biggest on the NYSE. Though bitcoin has been on fire all year, investors are attributing the latest rally to news that China could reverse its ban on cryptocurrency exchanges.
Given the computing technology’s importance in the modern era, Wood also asked whether the markets are lacking some essential commodities.
“It’s interesting that you’ve got corn and oil and copper trading on the exchange but you don’t have computing power, and bandwidth, and storage,” said Wood. “Well we think that’s going to happen because of blockchain technology and all of the cryptos that are coming along.”
The investor stated that ether, a unique bit of code that is used to fund for the computational resources required to run a program or an application, is more like a “cryptocommodity.” Ether largely serves as a “fuel” in the cryptocurrency generation.
“These markets are huge. We believe that digital services are as integral, or maybe more integral to our lives, than commodities that are traded on exchanges right now.”