Billionaire Investor Ray Dalio Sees Major Flaw In Bitcoin Investment Thesis

Kevin Mwanza
Written by Kevin Mwanza
Ray Dalio believes that the attractiveness of government bonds to investors could decline in the coming years, creating new questions around storing value. Ray Dalio on day two of Summit LA19 in Downtown Los Angeles on Saturday, Nov. 10, 2019, in Los Angeles. Photo by Amy Harris/Invision/AP

Billionaire investor Ray Dalio says cryptocurrencies such as bitcoin are not the best way to store value as they are fundamentally flawed.

CNBC interviewed the Bridgewater Associates founder Dalio as part of its coverage of the World Economic Forum in Davos.

Dalio painted a picture of the global economy that is similar to the supporting evidence bitcoin investors provide in terms of their bullish scenarios for the cryptocurrency.

He noted that the global economy is facing a serious issue. An economic downturn would be a problematic situation for central bankers, due to them running out of tools and policies available, with interest rates at historic lows in many places around the world.

“We’re in a spot in monetary policy where you can no longer stimulate the same way you did before,” said Dalio.

Dalio also sees larger budget deficits on the way. According to him, newly printed money will be used to pay for this increased spending.

However, this new scenario does not necessarily mean there will be a rise in inflation, as the new money could be put into financial assets.

“The way it works; they print money, they buy bonds, they give it to the seller of the bond, and they buy other financial assets,” said Dalio.

The attractiveness of government bonds to investors could decline in the coming years, according to Dalio. This will, in turn, create new questions regarding what would work best as a store of value.

Dalio stated that there would be an economic downturn during the next U.S presidential term. Although he agrees with bitcoin proponents in terms of potential issues with holding cash in the near future, he does not think that the cryptocurrency will be a proper alternative to store value.

Despite his views and comments, data from the second half of 2019 appears to show that bitcoin has made progress in terms of being viewed as a “digital gold”.

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A survey indicated more financial advisors are looking to add bitcoin and other crypto assets to client portfolios in 2020.

However, an improving regulatory environment around bitcoin is one of the reasons an analyst has stated that there’s a 60 percent chance for a bitcoin approval to occur this year.