Ray Dalio: Bitcoin Is A ‘Long-Duration Option On A Highly Unknown Future,’ But Ticks Regulation & Lack Of Privacy Risks
Bridgewater Associates founder called Bitcoin “one hell of an invention,” which the firm considers an investment for new funds in line with “cash is trash.”
Bridgewater Associates founder Ray Dalio has finally completed his journey from being negative on Bitcoin to neutral and now turning positive.
In his note to clients this week, which was later posted on Bridgewaters’ website, Dalio called Bitcoin “one hell of an invention.” He is also considering cryptocurrencies as investments for new funds that will offer protection against the debasement of fiat money in line with his “cash is trash.” Dalio wrote,
“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,”
“There aren’t many alternative gold-like assets at this time of rising need for them.”
Basically, there is a growing need for money or storehold of wealth assets that are limited in supply… that can be privately held, he further said.
While Bitcoin can “disrupt the existing monetary system” and make investors “very rich,” it has its risks in terms of being vulnerable to being hacked and restricted by governments wanting to control the money supply, he noted. And “the more successful it is the more likely” that the “government would invade the privacy and/or prevent the use of Bitcoin,” which would mean a “plunge” in demand.
In simple words, Bitcoin is a “long-duration option on a highly unknown future,” but keep in mind it can still potentially lose about 80% of its value, he said.
In his Thursday’s note, Ray Dalio said he felt compelled to “clarify what I think of Bitcoin” and cautioned that he is no expert in this.
While he doesn't explicitly go bullish on Bitcoin, this is a big positive endorsement from Dalio. He says Bitcoin has succeeded in “crossing the line” from a speculative idea to something that is likely to have value.
“Because there aren’t many of these gold-like storehold of wealth assets that can be held in privacy and because the sizes of their markets are relatively small, there exists the possibility that Bitcoin and its competitors can fill that growing need.”
However, besides the risk of supply, as there can always be something better that comes along and displaces Bitcoin, privacy is another issue to Dalio, who says, “it appears that Bitcoin will unlikely be as private as some people surmise.”
Overall, Bridgewater has Bitcoin in its sight as they “intently” focus on finding an “alternative storehold of wealth assets.”
Bridgewater is also looking to “soon offer an alt-cash fund and a storehold of wealth fund in order to better deal with the devaluation of money and credit that we consider to be a major risk and opportunity, and Bitcoin won’t escape our scrutiny,” he wrote.