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Refuting Ray Dalio’s Surprisingly Shortsighted Take on Bitcoin and Gold

Don’t invest unless prepared to lose all the money you invest. This is a high-risk investment, you shouldn’t expect to be protected if something goes wrong.

Ray Dialo
Ray Dialo

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Ray Dialo is one of the most popular and successful hedge fund managers and investors in the history of the world. He’s proven to understand money and stock trading, so his opinions pretty much resonate with most investors and they, sometimes can drive the values of certain assets.

However, just like a lot of institutional investors and authorities in the financial industry, Dalio has weighed in on the age-old Bitcoin vs. Gold trading debate, and he has chosen to side with the physical yellow metal over the digital one. In a video interview with Investopedia back in April, the CEO of hedge fund Bridgewater Associates slammed Bitcoin, calling it a speculative asset that is not an effective store hold of wealth.

While he praised blockchain technology and alluded that there will be crypto in our financial future (thanks to the entrance of banks and other institutions), Dalio claimed that for Bitcoin to be on the same pedestal as an asset like gold, it would need to function as a medium of exchange, while also achieving enough stability that price movements don’t necessarily affect its functionality.

On the flip side, the billionaire wrote in a LinkedIn post that many people have gone into stocks and equities, and these investment vehicles would end up witnessing reduced returns. To offset this reduction, investors would turn to gold.

He predicted that a lot of Central Banks would also be looking to keep the interest rates low as a means of fostering investments in a time when governments are engaging in conflicts and trade disputes all over the place. This would force investors to look for a safe harbor, and gold will pretty much become the asset of choice for people looking to store their wealth.

Dalio’s comments do make sense. The only problem is that times have changed, and Bitcoin is actually gaining a lot of traction from investors everywhere, including institutions. There are some faults in Dalio’s assessment of Bitcoin. First, unlike he said, the asset has been gaining traction as a proper payment tool. Online and offline retailers have begun to accept the asset, and thanks to innovations like the Coinbase Card and other cryptocurrency cards, crypto-backed payments have become increasingly easy.

The biggest advantage that Bitcoin has over gold as a payment solution is the advantage of divisibility. Bitcoin can be broken down into units and used to pay for products, but unless you’ve got a retailer who’s selling an item for the equivalent of a gold bar, paying with the yellow metal will be a tad difficult.

Bitcoin has also proven to be reliable in difficult financial times, as it has been able to hold a steady value over the past few weeks, despite escalating tensions between the United States and China. Bitcoin also rose steadily in May, while the traditional stock market plummeted amid interest rate related tensions between the government and the Federal Reserve.

So, as Dalio said in his post, investors could be looking for a safe harbor in light of stock market instability. However, as opposed to turning to gold, Bitcoin might be the next hot thing.

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