Bridgewater Associates founder Ray Dalio confirmed on Tuesday that a “tiny percentage” of his portfolio is allocated to Bitcoin. He acknowledged how it could play a special role in today’s worldwide inflationary environment, among a broader set of safe-haven assets.
Cash is Still Trash
In conversation with CNBC’s Andrew Sorkin, Dalio reiterated his “cash is trash” thesis, due to the speed at which its holders are losing buying power. Annual CPI inflation in the United States clocked in at 8.3% in April – only 0.2% down from the previous month’s 40-year high.
To combat this, the Federal Reserve has resolved to raise interest rates more aggressively than it has for the past two decades. However, this monetary tightening is already hammering equities, which Dalio claims are even “trashier” than cash.
“The question is what’s going to get you a real return,” he explained. “We’ve shifted into an environment where assets that do well, like in the 70’s – real return assets – are the best investments.”
The billionaire believes that the Federal Reserve’s action in pumping the economy full of money and credit has created unprecedented debt, which will culminate in “negative real returns” across the board. In the interest of diversification, he mentioned Bitcoin as worthy of a small role in one’s portfolio, playing the role of “digital gold”.
Bitcoin: Gold, or Money?
The moniker is a common one for Bitcoin, due to its limited supply issuance schedule designed to mimic that of physical gold. Hedge fund manager Paul Tudor Jones has even deemed it superior to the latter and suggested that it threatens the dominance of fiat currencies produced by central banks.
Dalio’s discussion of the asset headed in the same direction:
“I think we’re in an environment where we’re gonna ask ‘what is the new money,” he said. “What is the type of money that you can move between countries, that’s a medium of exchange and a store hold of wealth?”
Though Dalio believes that Bitcoiners and gold bugs get “too preoccupied” with Bitcoin, he noted that it’s made a “tremendous achievement” over the past eleven years, and makes up a “tiny percentage” of his own wealth.
Dalio once criticized Bitcoin and cryptocurrencies for “failing the purposes of money,” but turned around to view it as a gold alternative over the past two years. Nevertheless, the investor previously stated that if the cryptocurrency grows too big, the government will ultimately put it down.