Here’s Why Billionaire Ray Dalio Would Rather Own Bitcoin Than Bonds

B.Billionaire Ray Dalio’s Bridgewater Associates have the largest assets under management (AUM) of any hedge fund, with assets estimated at $ 140 billion. Of course, much of Ray Dalio’s investment philosophy may sound familiar to Bitcoin believers.

“Most of what people think of as money is really credit, and it’s going away. As this implies, a big part of the debt relief process is for people to discover that much of what they believed to be their wealth isn’t really there, ”Dalio wrote in a 2008 blog post.

Dalio supports investing in Bitcoin rather than a bond, believing that this strategy would lead the government to reduce its control over the monetary system. The statement is quite surprising given that his $ 140 billion fund had significant investments in government bonds. Dalio, who believes Bitcoin’s greatest risk is success, says he owns “some” bitcoin but didn’t reveal how much. Earlier this year, Ray Dalio expressed his intention to invest in cryptocurrencies to protect investors from currency devaluations.

Dalio was one of the money managers who previously had critical views on cryptocurrency but later accepted BTC as a store of value. “Unlike gold, the third largest reserve asset held by central banks, I can’t imagine central banks, large institutional investors, corporations, or multinational corporations using it [bitcoin]”Dalio tweeted last year.

Is Bitcoin Investing Better Than Bonds?

Bridgewater’s founder is bearish on bonds because he believes bonds pay less than inflation. The data also suggests that Bitcoin’s returns have significantly outperformed US bonds and securities.

Bond investors have faced setbacks over the past few decades. Returns fell sharply as investors focused on risky assets like stocks and currencies. In addition, economic disruptions caused by the pandemic and zero interest rate policies have further hurt returns on bonds and other debt instruments. Although the best-known US 10-year Treasury yield has stabilized in recent months, after hitting an all-time low of 0.54% in early March last year, Dalio still believes investing in bonds is an unwise idea.

On the other hand, Bitcoin price The past twelve months have seen massive growth despite the recent sell-off that wiped more than $ 20,000 per coin. Bitcoin price has been at almost 40% since the beginning of the year and has extended the twelve-month growth to 350%. The world’s most valuable coin has risen 7170% in the past five years.

Ray Dalio is concerned about the government’s behavior following Bitcoin’s success

Dalio said at a CoinDesk conference that cryptocurrencies can act as the best store of value in a volatile environment and raised concerns about the behavior of state coffers towards digital currencies. He claims that due to increased competition in government bonds, the U.S. government could put tight government controls in place or ban cryptocurrencies entirely.

“One of the great things I think is the concern that the government has the ability to … control bitcoin or the digital currencies. They know where they are and they know what is going on,” he said.

The role of the central bank and regulators could also hinder the wider adoption of cryptocurrencies, he said. “There is a possibility that Bitcoin and its competitors can meet this growing need,” he wrote in January.

Other big players are also stepping in after Bitcoin’s price slumped

Yale professor and Nobel Prize winner Robert Shiller plans to enter the crypto markets despite the high volatility of the crypto market in recent months. “I never bought Bitcoin. Maybe I should be active in this market, ”he said. Shiller, who received the Nobel Prize in Economics for his empirical analysis of asset prices, expressed his plans for the future in a CNBC interview last Sunday.

He calls cryptocurrencies a formidable technology and claims it is a very psychological market. He argued that narratives have a lot to do with the source of value than with reality. He said he was trying to get into crypto markets to see the effect. The shift in Shiller’s sentiment is among the biggest gains for bitcoin bulls, who have faced setbacks in recent weeks due to environmental concerns and stricter regulations. He was a bitcoin infidel and called it a speculative bubble in 2017.

Conclusion

Dalio’s idea of ​​shifting investments into assets that offer above-average returns is worth considering if an investor compares it to sluggish returns on bonds and debt. However, the investment allocation depends on your risk tolerance. Crypto markets can be volatile and have the potential to make or erase hundreds of billions of dollars in just a few hours alone. Nonetheless, the increasing interest of institutional investors in cryptocurrencies underscores the ability to become a true store of value and one of the most powerful payment methods of the future. In terms of returns, cryptocurrencies have outshone bonds in recent years, with trends suggesting that cryptocurrency adoption could accelerate further in the coming days.

The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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