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Ray Dalio: Bitcoin’s ‘Biggest Risk Is Its Success’

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What You Need to Know

  • The billionaire investor says he prefers Bitcoin to U.S. government bonds.
  • As popularity of Bitcoin grows, money will move out of bonds into Bitcoin, threatening government control over bonds, he says.
  • Don't confuse the real economy with the financial economy, he says.

Famed billionaire investor Ray Dalio who founded Bridgewater Associates, said he owns some Bitcoin and prefers it to U.S. government bonds.

Speaking in an interview with CoinDesk that was taped May 6 but not released until Monday, the first day of the crypto site’s Consensus 2021 virtual conference, Dalio said “cash is trash” and bonds have negative yields, which leads investors to seek other assets to store their wealth. Some of those investors are now buying Bitcoin, whose “biggest risk is its success,” Dalio said.

“As Bitcoin becomes more popular, more people will want to sell their bonds and buy Bitcoin in a bigger way … and they will lose control over that,” Dalio said, referring to governments who issue bonds and have their own currencies.

Dalio has previously said that governments could shut down cryptocurrencies, which India has threatened to do.

He recommends that investors now watch how big the Bitcoin market grows. The total value of that market now is a little over $1 trillion, compared with $23 trillion for U.S. Treasury securities and a little more than $5 trillion for gold minus central bank holdings and gold jewelry, Dalio said. He expects the Bitcoin market will grow relative to both bonds and to gold.

As for the next one to five years, Dalio referred to his writings on The Changing World Order, Where We Are and Where We’re Going.

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There he writes about “the confluence” of high levels of debt, extremely low interest rates, which limit central banks’ power to stimulate the economy, large wealth gaps and political conflicts and a rising China challenging the power of the U.S., causing external conflict.

He likens the current cycle to what prevailed between 1930 and 1945, with the 2008-2009 financial crisis resembling the 1929-1932 period, with serious debt and economic crisis, followed by a post-crisis recovery with large wealth gaps and conflict.

Dalio made a point in his taped interview that people should not confuse the real economy with the financial economy. A homeowner may feel richer because the price of his house has soared, but he’s still living in the same house.

“The world is going to change at an incredibly fast pace,” said Dalio in the conference interview. “Whoever wins the technology race wins it all economically and militarily. That’s what the next five years look like.”

Pictured: Ray Dalio. (Photo: Bridgewater Associates)