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Ray Dalio: Bitcoin extraordinary but uncertain

Ray Dalio: Bitcoin extraordinary but uncertain


Bitcoin is an extraordinary invention, that’s what Ray Dalio, CEO of Bridgewater Associates, thinks. 

Ray Dalio seems decidedly intrigued by Bitcoin, although he retains some concerns. One of them is related to the risk that governments might somehow make it illegal. A concept he reiterated in a long post on LinkedIn entitled: What I Really Think of Bitcoin.

The first thing he makes clear is that he is not an expert on Bitcoin so his opinion should be worthless, however, as he is often asked what he thinks about Bitcoin, he decided to externalize it.

“I believe Bitcoin is one hell of an invention. 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”.

For Ray Dalio, however, Bitcoin, like any other credit system, has made those who invented it and early adopters rich, yet those who built it have succeeded in making it an alternative asset to gold, doing “a fabulous job”.

Ray Dalio: Bitcoin is not forever

The CEO of Bridgewater Associates, however, fears that Bitcoin may not be destined to last for a number of reasons. 

He acknowledges that Bitcoin has the advantage of being easy to store, as do other digital currencies. This could satisfy a growing demand for reserve assets. But it is known that there can only be a maximum of 21,000,000 bitcoin. This is where Ray Dalio’s doubts come in. 

“Although Bitcoin is limited in supply, digital currencies are not limited in supply because new ones have come along and will continue to come along to compete so the supply of Bitcoin-like assets should, and competition will, play a role in determining Bitcoin and other cryptocurrency prices. In fact I assume that better ones will come along and displace this one because that is the way the evolution of everything work”.

The problem with Bitcoin is that in these 10 years it has never changed, and this means there is a risk that sooner or later the next best thing could come along:

“Since the way Bitcoin works is fixed, it won’t be able to evolve and I presume that a better alternative will be invented and pass it by. I see that as a risk. For those reasons the “limited supply” argument isn’t as true as it might appear”. 

The risk of Bitcoin is compared to what happened to the BlackBerry when it was replaced by the iPhone. 

Nevertheless, Bitcoin already has a 10-year history, during which its technology has proven to be very successful, according to Ray Dalio:

“Its technology has been working so well and has not been hacked”. 

But that doesn’t mean that there are no risks involved. Indeed, Ray Dalio says it would be naive to think that a digital asset cannot be hacked. And since Bitcoin is digital, there are risks involved. 

Finally, Ray Dalio reiterates the fear that the more important Bitcoin becomes, the more governments may oppose it

“If the government (and perhaps hackers) want to see who has what, I doubt that privacy could be protected. Also, it appears to me that if the government wanted to get rid of its use, most of those who are using it wouldn’t be able to use it so the demand for it would plunge”.

For Ray Dalio, the more Bitcoin grows, the more likely a government crackdown is. Because governments have always been in control of money. He says:

“I suspect that Bitcoin’s biggest risk is being successful, because if it’s successful, the government will try to kill it and they have a lot of power to succeed”.

In short, there’s a lot of uncertainty surrounding Bitcoin, and Ray Dalio goes so far as to say that he might invest in it but with the awareness that he might lose 80% of that investment. And he is not unlikely to invest in it, because in closing, he adds: 

“I am eager to be corrected and learn more. On the other hand, believe me when I tell you that I and my colleagues at Bridgewater are intently focusing on alternative storehold of wealth assets”.

 






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