- Patterson said that crypto is currently liquid sensitive and has a long way to evolve
- She held that the Russia-Ukraine standoff should speed up growth in the crypto space
- In her opinion, the momentum in crypto could become self-fulfilling as more investors join in
Bridgewater Associates' Chief Investment Strategist Rebecca Patterson has predicted that the current situation in Russia-Ukraine will only speed up the overall growth of ecosystems around digital assets.
Speaking to CNBC's Closing Bell, the investment manager noted that this is a significant moment for crypto as it is the first time the digital asset has been used as a geopolitical tool, unlike capital markets that have, in the past, been caught up in the midst of a geopolitical crisis.
Patterson added that crypto's role as a geopolitical tool has resulted in a lot of "push and pull." The Bridgewater Associates' executive was referring to the contrasting events of money (crypto) going into Ukraine to help with the humanitarian crisis and money attempting to move out of that region via crypto.
Crypto is still not a storehold of wealth
Taking the days before the Russia-Ukraine conflict for perspective, Patterson observed that even then (just as today), crypto showed a tendency to swing depending on liquidity. She referenced the market plunges earlier on in the year as the Fed confirmed plans to hike interest rates.
"It's still trading relatively more like a liquidity-sensitive asset, like an emerging tech stock, than an alternative storehold of wealth or digital gold. It's still early days, this is an evolving asset class, but the storehold of wealth story, I think, is one that's still to be proven," Patterson noted.
The ongoing war in Ukraine will advance the crypto sector
Answering a question, the investment strategist noted that overall, growth in the larger crypto ecosystem is imminent. With continued evolution on the way, she said, the markets in the sector should see more money.
"There is a momentum here that can become self-fulfilling when you think about the broader crypto ecosystem, everything from metaverse, to NFTs, to web 3.0 and the more money that goes in, the more institutional players that are looking at the broader ecosystem, whether we're talking venture capital or the actual currencies, the more it's likely to become something that's entrenched."
Further, she added that the Russia-Ukraine situation should speed up growth in this niche, specifically regulation-wise. As the US and its allies attempt to ensure the complete effectiveness of the economic sanctions on Russia and eliminate possible loopholes, policymakers will seek to regulate the sector.
Indeed, this has already been witnessed in the US. The Ukraine crisis reportedly fast-tracked the release of the White House's crypto executive order signed by US President Biden yesterday.
Also, as the Russian situation has shown that central bank reserves may not be 'always' available, she expects more people will start seeking alternatives such as crypto.