“I might be missing something so I’d love to be corrected,” Ray Dalio said in November, while musing idly on social media about cryptocurrencies.
At the time, Bitcoin was trading around $17,500. That seems laughably low today, but it still represented a stupendous YTD gain. Shortly thereafter, Bitcoin embarked on a near relentless ascent to ~$63,000, only to crash 50% from April’s highs during last week’s fireworks.
When Dalio weighed in just before Thanksgiving, he was attempting to make a rational case for Bitcoin which, he said, “is not very good as a medium of exchange because you can’t buy much with it.” He added that,
It’s not very good as a store of wealth because [of] its volatility and has little correlation with the prices of what I need to buy, so owning it doesn’t protect my buying power. And if it becomes successful enough to compete and be threatening enough to currencies that governments control, the governments will outlaw it and make it too dangerous to use.
Dalio wasn’t “missing” anything. As I put it at the time, he was “precisely correct.”
The problem for Dalio (and he’s hardly alone) was his failure to realize that Bitcoin can’t be analyzed through any traditional lens. It’s not a currency. It’s not an asset. It’s not a store of value, either. In fact, I’ve argued it’s not anything at all.
Fast forward to May, and Dalio now owns “some” Bitcoin, according to an interview with CoinDesk Chief Content Officer Michael Casey. His rationale: It’s an inflation hedge. Or at least that’s part of his reasoning.
Dalio’s interview, recorded some three weeks ago, was set to be broadcast Monday during a CoinDesk conference. The conversation was more than an hour long and, as you can imagine if you follow Ray, parts of it were a bit tedious due to Dalio’s penchant for digression.
Notably, Dalio volunteered the information on his Bitcoin position. It was’t clear how much he owns or who, exactly, owns it (i.e., Bridgewater or just Ray personally). “I have — I have some Bitcoin,” he interjected (short clip, below).
“That’s an existential risk,” Dalio told Casey, reiterating points he’s made previously around the idea that governments could eventually be faced with a scenario where investors want to sell government bonds and buy Bitcoin instead.
For the time being, Dalio said Bitcoin simply “is not that big a deal,” which explains governments’ reluctance to go full throttle in cracking down on the cryptosphere.
Last week may have represented a turning point in that regard, though. Between Beijing’s renewed zeal and a Treasury report imploring the IRS to take a more aggressive approach to reporting, the regulatory winds started to blow in the “wrong” direction again for Bitcoin proponents.
“One of the things, I think, as a worry is the government having the capacity to control almost any of them, including Bitcoin,” Dalio went on to caution. “They know where they are, and they know what’s going on.”
(They sure do.)
In March, Dalio expressed some concern about the possibility that the government might confiscate gold and Bitcoin. “Policymakers who are short of money… won’t like these capital movements out of debt assets and into other tax domains so they could very well impose prohibitions against… gold, Bitcoin, and other locations,” he said, warning that such changes “could be more shocking than expected.”
On Monday, BOE governor Andrew Bailey called crypto assets “dangerous.”
At this point I believe many wealthy folks who have benefitted beyond belief from Central Bank supported investment returns now own BTC+ as a new “plaything” that they’ve purchased with “house money.”
Sad to see Ray engage in the FOMO, Greater Fool approach…
I’m not sure it is an inflation hedge as much of an expanding pyramid speculative bubble hedge…again, for anyone who’s wealthy enough – why not…?
We are headed for global financial rules established by unelected, appointed rule makers. Global collusion among the big currency printers to control interest rates, cryptos, taxation and anything else that significantly impacts global capital flows. The currency printers absolutely do not want to lose control and they will stop at nothing.
Are you arguing that Rand Paul or Ted Cruz is a better minder of financials?
I am sad to see that Dalio is so short sighted. Where is a Macro view Raymond? Punter.
The currency printers should stop at nothing to halt something that will reek as much havoc on national economies much as gold did. Currencies are a rentier part of the economy owned by government,elected,appointed,what have you, as a nation. The Chinese well know what gold did to their economy and dynastic end. Many in the USA are unaware that our Revolution was an economic war. The Southern plantations were being forced to settle debts in gold which caused a financial crisis. The North was being forbidden to use the various exchange mechanisms that developed which caused a Depression. There was not enough Gold to enhance GDP.
Perhaps the time will come for something other than Reserve currency and exchange based interest rates, much as MMT acknowledges. The world would have to be a very peaceful place. Crypto can cause currency wars with nothing but greed and no fear of blood as a guide. Look to Haiti, debt payable in Gold forever impoverished those people. Thankfully Alexander Hamilton understood all this from his Caribbean career. Just when the world is being released from the grip of Gold,are we going to willingly jump into the unknown. Yes, there is always a sickness of the heart. Tulips were never going to have this potential. Silly thought?