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“I Have Some Bitcoin”: Dalio Prefers Bitcoin To Bonds, Thinks Ethereum Is More Efficient

“I Have Some Bitcoin”: Dalio Prefers Bitcoin To Bonds, Thinks Ethereum Is More Efficient

A question that has been nagging Wall Street’s traders and millions of retail crypto enthusiasts since late 2020 was finally answered:

During today’s CoinDesk Consensus 2021 Conference, Ray Dalio said that not only would he rather own bitcoin than bonds – and for the world’s largest risk parity hedge fund which traditionally hedges its equity exposure using a balanced 60/40 bond/stock split that’s saying a lot – but putting all doubt to rest, he said that “I have some bitcoin.”

Expanding on a theme that he has been discussing extensively in recent months, Dalio said that should cryptocurrencies continue to gain traction, investors might decide to invest in them rather than government bonds, with the result being that governments lose control over their ability to raise money.

Reiterating his well-aired concerns about the future reserve status of the dollar, Dalio lamented the soaring US debt load and said that “when the pile gets very big” but the incentives to keep investing in the debt subside, it eventually leads to the printing of money.

“Money is credit – you can make it up,” Dalio says. But the incentive right now to hold dollars is low. No interest being paid. Even bonds don’t yield much, he said in comments captured by Bloomberg.

Eventually people will go to “almost anything else” – stocks, gold, real estate and yes, even bitcoin, according to the Bridgewater billionaire.

In short, Dalio reiterated his argument that governments including the US are devaluing their currencies with the run-up of debt, and the deployment of quantitative easing by central banks. He drew an arc from the demise of the Dutch guilder to the FDR and Nixon dollar devaluations of 1933 and 1971 to the Fed’s moves in the spring of 2020.

It’s hardly a surprise then that he prefers bitcoin to bonds.

Dalio – whose favorable view of China’s economy is also well-known – said that China’s assets are increasingly more attractive to global investors, with higher yields and a more open financial system. He said China’s key role in international trade naturally lends itself to a broader role for the yuan.

Dalio also shared his thoughts on inflation, saying there are two types: one is cost-push, one is driven by the supply of money. The big inflations aren’t the supply-demand driven ones, but monetary inflation periods.

He then repeated a mantra he has been saying for the past three years: “Cash is trash” he said, warning that “you’ll experience more inflation.”

So what is the solution? To Dalio it means owning a diversified portfolio.

“Why does it need to be one or the other?…You want a properly diversified portfolio…. Question is…do you have enough diversity of these alternative currencies?” Why? Because in a surprisingly pragmatic view on fiat he stated simply that “all currencies have died.”

He said he owns bitcoin, and prefers that to owning a bond, although when discussing payment efficiencies, he echoed Goldman: “it seems like Ethereum”

And picking a page out of the JPMorgan bitcoin price target, Dalio advised to keep track of the market capitalization of bitcoin – now $1 trillion – relative to the $23 trillion for bonds and $5 trillion for gold (excluding jewelry and central bank holdings).

“For gold, if you take out central banks and jewelry, you have a little over $5tn, so diversification between those things (bitcoin and gold), it’s like 80/20.”

This is also why JPMorgan has a roughly $140,000 price target on bitcoin: that’s where the market cap of gold and bitcoin (i.e. digital gold) is roughly in balance.

Finally, wrapping up his extremely bullish view on bitcoin, Dalio said that “these things come along once in a lifetime….in order to understand what is going to happen over the next 1,2,3,4,5 years, you need to study what happened [in the 1930s]. “If you take your wealth….how do you protect it against all of those things…if you can find that, there will be a whole lot of demand for it””

Or, as Jump Capital Partner Peter Johnson put it “That was the most bullish conversation on crypto I have ever heard from who I consider the smartest investor in the world @RayDalio.”

Tyler Durden
Mon, 05/24/2021 – 11:36

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