Ray Dalio, in a recent blog post, shared some insights that might suggest that he is edging toward a bullish stance on Bitcoin.
Dalio points out what makes good money: a means to trade and a place to park wealth, accepted globally. Right now, the top contenders are the dollar, euro, yen and Chinese renminbi. But here’s the thing: these are all tied to debt. That means when you are holding onto these currencies, you are actually holding onto promises of payment — debt liabilities.
He highlights a simple truth: when the risk is high that debts will not be paid back or will be paid back in money that has lost value, confidence wanes. If a country is swimming in too much debt, its central bank might just print more money to ease the pressure, leading to devaluation.
Gold is different. It is not backed by debt. It is more resilient to the devaluation that hits cash and bonds when inflation rears its head. Central banks and investors like gold because it does not wilt under debt defaults and inflation — it is actually the third-most-held reserve after the major currencies.
Now, cryptocurrencies are like gold in that they are nondebt monies too. While some might argue that gems or art serve a similar purpose — being nondebt, portable and accepted storeholds of value — Dalio’s focus is on recognized financial safeguards.
When the system works fine, with no debt or inflation crises, and governments manage their monetary duties without devaluing their currency, then financial assets are solid. But when trouble bubbles, Dalio says gold is a good asset to own because it is a reliable hedge — a diversifier in his own portfolio. He is careful to clarify, though, that he is not giving direct investment advice, just offering his take on the markets.
