Ray Dalio: Bitcoin is “gold-like” but governments won’t let it win

Billionaire hedge fund manager Ray Dalio has sought to clarify his views on the world’s most famous digital asset with the publication of a short essay titled “What I Really Think of Bitcoin”.

Dalio’s views on Bitcoin (BTC) — which he said should be read directly to avoid media misinterpretation — are both hopeful and cautious. Firstly, Dalio recognized the technical accomplishments of Bitcoin and praised its ability to last for over a decade already:

“I believe Bitcoin is one hell of an invention. 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.”

What’s more, Dalio believes that Bitcoin is already an “alternative gold-like asset,” and one that will become more and more important in the future due to the debasement of fiat currencies by excessive money and debt printing:

“Those who have built it and supported the dream of making this new kind of money a reality have done a fabulous job of sustaining that dream and moving Bitcoin (by which I mean it and its analogous competitors) into being an alternative gold-like asset. There aren’t many alternative gold-like assets at this time of rising need for them (because of all the debt and money creations that are underway and will happen in the future)."

Dalio thinks Bitcoin has already crossed the line from being a “speculative idea” to something that will “probably” have some value in time to come:

“It seems to me that Bitcoin has succeeded in crossing the line from being a highly speculative idea that could well not be around in short order to probably being around and probably having some value in the future."

However, not everything is rosy regarding Dalio’s thoughts on the world’s first cryptocurrency. The hedge fund manager thinks the extent of Bitcoin’s privacy will depend entirely on how private the government allows it to be:

“As an extension of Bitcoin being digital are the questions of how private it is and what the government will allow and not allow it to be. Regarding privacy, it appears that Bitcoin will unlikely be as private as some people surmise. It is, after all, a public ledger…”

Why would governments want to disrupt the use of Bitcoin? As Dalio points out, the principles at play now are the exact same as those at play in the year 1694, when the newly launched Bank of England sought to solidify its position as the sole issuer of debt and monies within its borders.

Leaders in any industry will naturally try to quash opposition, and the same might happen with Bitcoin, especially, as Dalio points out, if it ends up becoming more and more popular.

“Rather than it being far-fetched that the government would invade the privacy and/or prevent the use of Bitcoin (and its competitors) it seems to me that the more successful it is the more likely these possibilities would be.”

Dalio does not think government agencies will allow Bitcoin to flourish as an alternative to printed money — a sobering thought which pours some icy water on his earlier praise of the technology. Dalio said:

“It is hard for me to imagine that they would allow Bitcoin (or gold) to be an obviously better choice than the money and credit that they are producing. I suspect that Bitcoin’s biggest risk is being successful, because if it’s successful, the government will try to kill it and they have a lot of power to succeed.”

The alleged demand which Bitcoin is credited with having as a result of its diminishing supply was also questioned by Dalio, who pointed out that the emergence of “Bitcoin-like” assets (other altcoins) effectively expanded Bitcoin’s supply by offering an alternative but similar service.

Putting thoughts and theories to one side, Dalio also asked his staff at Bridgewater Associates to calculate the efficiency of Bitcoin as a diversified asset in relation to gold during market drawdowns.

The researchers concluded that it was still too early to judge whether Bitcoin would provide the same degree of diversification in the future.

“We hesitate to draw any firm conclusions with such a small sample size and given how quickly the cryptocurrency world is evolving. So far, Bitcoin’s ability to offer some diversification benefit seems more theoretical than realized,” the report stated.