Ark Invest’s Cathie Wood Flags 3 Reasons Behind The Market Crash

Cathie Wood said markets sold off due to fading AI hype, a crypto market reset, and tighter Federal Reserve policy, adding that the downturn was a reset that is highlighting stronger crypto assets.

• Cathie Wood said the crypto market selloff was driven by fading AI hype, a broad crypto pullback, and tighter Federal Reserve policy that reduced liquidity.
• She described the downturn as a market ‘reset’ rather than a collapse, saying the volatility reflected fear and tighter liquidity.
• Wood said the reset was highlighting stronger crypto assets, naming Bitcoin, Ethereum, Solana, and Hyperliquid as emerging winners.

ARK Invest CEO/CIO Cathie Wood said on Friday that the recent market volatility was driven by three key reasons: fading AI hype, a broad crypto market reset, and a shift in Federal Reserve macro and liquidity policy.

She added, “AI hype, crypto meltdown, and macro variables like Fedspeak—those are the three topics that have really unnerved the markets.”

Wood stated in an ARK Invest market update that the first pressure point in the recent market volatility came from the decline of AI hype, as investors began to question heavy spending and high expectations in the technology market. 

The second reason, Wood added, was a widespread crypto market reset, which followed sharp price declines across major digital assets. According to the 70-year-old asset manager, she recalled many “bear stories” about Bitcoin (BTC) in the last few weeks. “There has been so much negative sentiment,” Wood stated, reflecting fear in markets. However, that is not long-term damage to blockchain fundamentals, she reiterated. 

Bitcoin (BTC) was trending at number 1 on Stocktwits and was around $68,575.81, up by 5.2% in the last 24 hours. On Stocktwits, the retail sentiment around Bitcoin improved from ‘extremely bearish’ to ‘bearish’ territory, with chatter at ‘extremely high’ levels over the past day.

The Federal Reserve, under its macro policy, has been reducing the size of its balance sheet since the pandemic, shrinking its holdings of assets such as Treasury securities and mortgage-backed bonds, a process that affects how much liquidity is available in financial markets.

Wood marks this as the third factor behind the market volatility, describing it as a “liquidity drain,” tied to a shift in the Fed’s macro policy as it continued reducing the size of its balance sheet. She said uncertainty over how far and how quickly the Fed would reduce its asset holdings was tightening liquidity across the financial system, limiting bank reserves and adding pressure to risk assets like Bitcoin.

Crypto Selloff Seen As A Reset, Not A Breakdown

Wood framed the market decline as a reset rather than a collapse. She pointed out that the recent volatility was largely driven by fear and tighter liquidity, not by long-term damage to innovation-led sectors such as artificial intelligence and blockchain technology.

According to Wood, the reset helped separate the “big winners” from the other crypto projects. Her list of crypto projects that emerged stronger as the market adjusted consisted of Bitcoin, Ethereum (ETH), Solana (SOL), and Hyperliquid (HYPE). Wood added that investors were watching closely how these risk assets performed as liquidity conditions evolved and market confidence stabilized. 

For updates and corrections, email newsroom[at]stocktwits[dot]com<