"Principle" author: Bitcoin's volatility is too high, gold will become a safe-haven asset during economic downturns

Recently, Ray Dalio, the founder of Bridgewater Associates and one of the top 100 wealthiest individuals globally, participated in an interview with CNBC during the China Development Forum. During the interview, Dalio depicted future global economic trends, forecasting economic downturns as countries accumulate high levels of debt. He also shared his personal insights on safe-haven assets such as gold and Bitcoin.

• Cash is trash, gold is a hedge asset, not Bitcoin
• Facebook's Libra stablecoin is more optimistic than Bitcoin

Ray Dalio, known as the Steve Jobs of the investing world, is the founder of Bridgewater Associates, established in 1975, renowned for its investment style based on global macroeconomic trends such as inflation, currency exchange rates, and the U.S. GDP.

In 2018, Dalio published "Principles," a bestselling book compiled based on the principles he developed while running Bridgewater Associates.

In an interview, Dalio outlined various factors detrimental to the global economy, with his views on the future economic development in the coming years closely resembling those of many long-term Bitcoin supporters. However, when it comes to hedge assets, Dalio's recommendation is gold, not Bitcoin.

Global Economic Downturn Imminent

Dalio stated that interest rates around the world have reached or are close to historical lows, and the threat of an economic downturn poses a particularly challenging problem. Stimulating the economy with measures like interest rate cuts and quantitative easing is no longer as effective. He pointed out:

I see growing budget deficits. The attractiveness of government bonds to investors may decline in the coming years, raising new questions about what the best store of value is.

According to reports, Dalio specifically stated that the economic downturn will occur during the next U.S. presidential term, and in such a scenario, cash would not be a good option. He explained:

Banks can print cash at will, meaning it has no intrinsic value. In the next few years, lacking good monetary policies, currency depreciation and money printing will be the biggest problems.

Indeed, this perspective has also been supporting many cryptocurrency enthusiasts who are bullish on Bitcoin.

Bitcoin Inadequate

Despite having similar macro views, Dalio does not endorse cryptocurrencies. He believes that allocating a certain amount of funds into gold as one of the diversified investment portfolios would be the best choice for investors to confront the forthcoming economic downturn in the next few years. He emphasized:

Money has two functions, a medium of exchange and a store of value. Bitcoin does not fit in either case. The volatility of Bitcoin is too high to be a proper store of value.

Dalio added:

What will central banks use as reserves? What assets have been used as reserves and actually existed? Will they choose Bitcoin? They will hold gold. It's a reserve asset that has been around for a thousand years.

In the long run, Dalio believes that Facebook's Libra project is more promising. Its stablecoin, linked to a basket of fiat assets, may make Libra more stable than Bitcoin.

Further Reading

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• Are Mainstream Platform Coins Ideal Investment Targets? Three Major Platform Coins Outperformed Bitcoin Last Year