Here’s what billionaire Ray Dalio thinks

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For Ray Dalio, bitcoin is like a digital version of gold, but the billionaire clearly values ​​one higher than the other.

“If you put a gun to my head and say, ‘I can only have one,'” said Dalio. “I would choose gold.”

Dalio, who turns 72 on Sunday, revealed in May that he owned an undisclosed amount of bitcoin, after previously raising concerns about cryptocurrencies for years. However, he is not completely convinced by the concept.

“I own a very small amount of bitcoin. I’m not a big owner,” Dalio told CNBC Make It. “There are certain assets you want to own to diversify the portfolio, and bitcoin is something like digital gold.”

In 2017, Dalio stepped down as CEO of Bridgewater Associates after making his company the largest hedge fund in the world. He is now President and Co-Chief Investment Officer of Bridgewater, and reappeared in the corporate world last year with the launch of Principles, a people management software startup.

He’s been a bit of a gold bull for a long time: In 2019, he wrote on LinkedIn that adding gold can help balance his portfolio because it both lowers risk and improves return. Last year, Bridgewater invested over $ 400 million in gold during the second quarter.

Globally, central banks currently hold more than 35,000 metric tonnes of gold, or about a fifth of all gold ever mined, according to Reuters. Typically, central banks hold gold to diversify their reserves, and because gold is a limited physical commodity, it is a natural hedge against inflation.

Bitcoin can also help protect against inflation, as Dalio himself told Coindesk in May. But if he were forced to choose between gold and bitcoin, he says he would choose gold because of its long history as a “stock of wealth”, that is, an asset that can be held and converted to cash at a rate relatively similar to its purchase price. .

In other words, bitcoin’s volatility is a concern for Dalio and not the only one.

Fears of harsh regulation or worse

In Dalio’s mind, there is “a reasonable chance” that bitcoin will eventually be banned by the federal government. The Nearly Centenary Precedent: In 1934, President Franklin D. Roosevelt signed the Gold Reserve Act, transferring all of the country’s private gold titles and certificates to the United States Department of the Treasury.

At the time, the United States adhered to the gold standard; Roosevelt hoped to revive the country’s economy after the Great Depression by devaluing the dollar. Any major economic slowdown or inflationary event, Dalio told Yahoo Finance in March, could prompt federal governments around the world to take similar action on bitcoin and other cryptocurrencies.

He is not alone. Federal Reserve Chairman Jerome Powell is not a fan of cryptocurrencies either, calling them “vehicles of speculation” in April. Powell also compared cryptocurrencies to gold, noting that humans have long given gold “a special value that it doesn’t have.”

Over the past few months and years, many financial experts have cautioned against the volatility of cryptocurrency, recommending that people invest only the money they can afford to lose. For Dalio, bitcoin is just one small piece of his biggest investment puzzle. “I just think of it as diversification,” he says. “Overall, I don’t really know if bitcoin is going to go up or down. I could argue both sides of that.”

The key, he says, is to continually re-evaluate these investments and avoid buying more assets like bitcoin just because it temporarily performs well. “Be careful what you put your money into,” he says. “And make the diversification global, not just in the United States.”

As of Wednesday afternoon, a bitcoin was valued at around $ 39,000, down from its mid-April high of around $ 63,000, according to cryptocurrency tracker Coindesk. An ounce of gold is currently worth $ 1,800, up slightly from $ 1,776 over the same period.

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