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Portfolio > Investment VIPs

Ray Dalio: Cathie Wood's $500,000 Bitcoin Forecast 'Doesn't Make Sense'

By Bernice Napach

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What You Need to Know

  • Market shares are roughly $5 trillion for gold and about $1 trillion for Bitcoin, according to Dalio.
  • He says Bitcoin’s market share is limited given the cryptocurrency's volatility and other attributes.
  • Dalio says he plans to work only another year or two before retiring.

Ray Dalio, the billionaire hedge fund manager, takes issue with Ark Investment Management CEO Cathie Wood’s forecast that the price of Bitcoin will rise tenfold to around $500,000 five years from now.

“That doesn’t make sense to me,” said Dalio, who was interviewed by New York Times columnist and CNBC co-anchor Andrew Ross Sorkin at this week’s SALT conference in New York.

“There’s a certain amount of reflation, a certain amount of those kinds of things going on to make a price increase,” explained Dalio, the founder of Bridgewater Associates. “Then there’s a certain market share that gold will have, that Bitcoin will have.”

Those market shares are roughly $5 trillion for gold, excluding central bank holdings and jewelry, compared with about $1 trillion for Bitcoin, according to Dalio.

“Given its volatility and total attributes, I don’t imagine that the market share [of Bitcoin] will be much greater,” Dalio said. For Bitcoin’s price to increase as Wood has forecast, its market share would have to be greater than the total amount of money held in non-fiat currencies. That “seems like a stretch too far,” said Dalio, adding that it could happen, however, if there were a problem with fiat currencies.

He advised investors to “pay attention to those non-fiat currencies” and those things that can be taken from one place to another and are accepted around the world and are not debt. “That category is a more interesting conversation. Do you have a diversified portfolio of those things? And what is a good balance? That’s the more interesting question.”

Dalio owns both Bitcoin and gold, but more gold than Bitcoin.

The Changing World Order

Dalio described a changing world order that increases the allure of alternative assets and  stocks: near-zero interest rates, large wealth gaps, China’s growing challenge to the U.S. dominance and bad finances — when spending exceeds earnings, so liabilities exceed assets.

“The system is going to change greatly because there are irreconcilable differences dealing with money and wealth distribution. … Investors should think beyond the immediate two to five years ahead.”

Part of that global change is the growing power and importance of China, according to Dalio, who has written a new book, “Principles for Dealing With the Changing World Order: Why Nations Succeed and Fail,” due out this fall.

Investors should also try to understand China and why a communist, Marxist economy can be capitalistic and the second-largest economy in the world, producing billionaires and affecting capital markets, according to Dalio.

“If you can’t resolve that, then you don’t understand China,” and the more the U.S. and China fail to understand each other, the more they are likely to be an existential risk to each other, he said.

Forthcoming Retirement

On a personal note, Dalio said he expects to work another year or two and then he’s “done,” going “quiet” and doing the things he likes to do. The 72-year-old hedge fund manager said he’s entered the transitional phase of his life, when he will work to help others try to be successful.

As part of that mission, he has created free, public online versions of the methodologies used at Bridgewater Associates whereby employees routinely critique the performance of other employees in order to maximize performance. The websites, called PrinciplesYou and PrinciplesUs, are based on the same “radical truthfulness” and “radical transparency” that underlie those routine critiques.

“Knowing what you’re like and knowing what others are like allows people to play to their strengths and avoid their weaknesses rather than try to cover them up with politics,” Dalio said.

Pictured: Ray Dalio. (Photo: Bridgewater Associates)

Bernice Napach

@Think_Napach

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