For those doubting bitcoin’s staying power… listen up:
The billionaire hedge fund investor Ray Dalio has a warning–and some investing advice.
Dalio says the Fed’s easy-money policy, together with irresponsible fiscal policy, could lead to the collapse of the U.S. dollar as the reserve currency of the world. As the coming dollar crisis unfolds, he believes, bitcoin will become an ever-greater threat to central banks throughout the world. Unless, of course, they crack down on it first.
Dalio, founder and co-chief investment officer of Bridgewater Associates, gave an interview for CoinDesk in which he expressed his concerns about the future of the U.S. dollar. He also revealed that he owns Bitcoin.
After the 2008 financial crisis, Dalio began studying the history of global reserve currencies and the reasons behind their fall.
He discovered that irresponsible monetary and fiscal policy are the likely culprit, and stated that these could bring the U.S. dollar down as well.
“You need to borrow money? You have to print that. You need more money? So, taxes go up…” Dalio explained.
‘Cash Is Trash’
Dalio thinks “cash is trash” in an expansionary environment, which causes investors to “snap up” assets.
“It causes… gold, bitcoin, real estate, everything to go up, because it’s really going down in dollars. And that’s the part of the cycle we’re in.”
This sounds good for those assets, but only in the short run. Like with bonds, as their prices rise, their future returns on investment fall, Dalio explains.
“As they come closer to the interest rate … then there’s no longer the incentive to buy those things,” pointing to the fact that these inflated asset prices can only be sustained by low interest rates.
“It becomes very difficult to tighten monetary policy because the whole thing falls apart. Everything’s interest rate-sensitive,” he explains.
This analysis raises serious concerns over the stability of the global financial system. But it also shows why Bitcoin could play an important role in the future.
‘I’d Rather Have Bitcoin Than A Bond’
Dalio is not a fan of government bonds, as their returns are below the inflation rate. Inflation-weary investors in need of liquid assets traditionally flocked to gold. Now, some are flocking to Bitcoin.
Dalio sees Bitcoin as an alternative store of value, one which could potentially hurt demand for bonds.
“Personally, I’d rather have bitcoin than a bond,” he stated.
In fact, he related that he did own “some” Bitcoin. He did not reveal how much, or whether he owns it personally or through Bridgewater.
But when that starts happening on a larger scale, Dalio continued, the governments will start losing control over the financial system.
That’s when the governments are likely to start cracking down hard on cryptocurrencies, he said.
“They know where they are, and they know what’s going on,” the billionaire hedge fund investor warned.
These remarks should give pause to any investor. Whether it’s crypto or gold, it is a good time to hedge one’s bets.