Ray Dalio: Bitcoin’s Greatest Risk Is Its Success

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In Brief
  • Bridgewater Associates founder Ray Dalio said Bitcoin’s greatest risk is its success.

  • Cryptocurrency gains could outweigh the appeal of bonds for investors.

  • “Personally, I’d rather have Bitcoin than a bond,” Dalio said.

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Bitcoin’s success could potentially find it in the crosshairs of governments, according to Ray Dalio, founder of Bridgewater Associates.

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“Bitcoin’s greatest risk is its success,” Dalio said. He explained that as cryptocurrencies gain traction, the appeal of higher returns may tempt investors to choose them over bonds. If more people sell their bonds, and rather buy cryptocurrencies, this could threaten governments’ ability to raise money. “They lose control over that,” Dalio noted. “And that’s an existential risk.” 

Dalio claims that investing in bonds, “has become stupid” because their gains are less than inflation. He also admitted that he’d rather own bitcoin than a bond, adding that he in fact owned some bitcoin. Despite this, the majority of the $151 billion his firm manages is in U.S. Treasuries and other government bonds.

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Dalio’s bitcoin reversal

Although Dalio is currently advocating for Bitcoin, he only changed his tune relatively recently. Speaking at the World Economic Forum in Davos, Switzerland, in January 2020, Dalio encouraged investors to keep a diversified portfolio. However, he only recommended hard assets, such as gold, and advised against investments in cryptocurrency assets, like Bitcoin. He called it “too volatile” and said a project like Facebook’s Diem stood a better chance of seeing widespread adoption. He also said central banks were unlikely to hold Bitcoin in the way that they hoard gold.

Then, one year later in January 2021, Dalio called bitcoin, “one hell of an invention.” At the time, he was considering cryptocurrencies as investments for new funds which offered clients protection against inflation.

“To have invented a new type of money via a system that is programmed into a computer and that has worked for around 10 years and is rapidly gaining popularity as both a type of money and a storehold of wealth is an amazing accomplishment,” Dalio wrote in a note to clients and later posted on Bridgewater’s website. 

However, Dalio still admitted he found it challenging to put a value on digital assets. He highlighted bitcoin’s risks despite its potential to “disrupt the existing monetary system.” These included cryptocurrencies being vulnerable to hacking and subject to restrictions by governments that want control over the money supply.

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Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage. He can best be described as an optimistic center-left skeptic.

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