Billionaire Ray Dalio Explains Why He Likes Owning Both Gold and Bitcoin

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As a seasoned investor with decades of experience under my belt, I can’t help but feel a sense of resonance when Ray Dalio speaks about the global financial landscape. His insights during the Abu Dhabi Finance Week were particularly enlightening, as they echoed my own concerns about the unsustainable levels of debt in major economies like the US and China.

Ray Dalio is the founder of Bridgewater Associates, where he functions as a mentor for the Chief Investment Officer (CIO) and continues to be an integral part of the company’s board.

During the Abu Dhabi Finance Week (ADFW) in the United Arab Emirates on Tuesday, Dalio expressed concerns about an impending global debt crisis. This crisis, he stated, is likely due to excessive borrowing in significant economies like the U.S. and China. He predicted that this could result in a substantial decrease in the worth of fiat money. Dalio recommended that investors steer clear of debt-backed investments such as bonds and instead prioritize tangible assets such as gold and Bitcoin. He urged a strategic, long-term approach to economic trends rather than being swayed by daily news headlines.

Initially harboring doubts about Bitcoin, Dalio now views it as a dependable investment, similar to gold. His advice is to assign 1-2% of your investment portfolio towards Bitcoin as a protective measure against inflation, all the while advocating for diversity in investments.

As a crypto investor on April 18, I came across Ray Dalio’s LinkedIn post titled “Do You Have Enough Non-Debt Money?”, where he shed light on the characteristics of good money – serving as both an effective medium of exchange and a reliable store of wealth that is universally accepted. He highlighted the dollar, euro, yen, and Chinese renminbi as the most globally recognized currencies, pointing out that they are all debt-backed forms of money. In essence, Dalio explained that when we possess these monies, we’re essentially holding debt obligations, which are promises to repay us in currency.

Nevertheless, Dalio warns that if there’s a high risk of debts not being repaid or repaid with weakened currency value, these obligations become less appealing. He explains that when a government accrues excessive debt, its central bank may resort to printing money, which can cause inflation and the depreciation of the national currency.

Instead of currencies tied to debt, Dalio emphasized gold as a type of money not reliant on debt. He explained this as similar to cash but with a key difference – while cash and bonds can lose value due to risks like default or inflation, gold maintains its worth because it is affected by the risks of debt defaults and inflation. Notably, Dalio pointed out that central banks hold more gold reserves than yen or renminbi.

Additionally, Dalio recognized cryptocurrencies as an alternative type of non-debt money. Some individuals may contend that precious stones and artwork function in a similar manner because of their non-debt characteristic, ease of transportation, and widespread recognition as assets for storing wealth.

Dalio suggests that during times when the financial system operates smoothly, with governments fulfilling their obligations without relying on money printing or devaluation, it’s advantageous to invest in debt assets and other financial instruments. However, he underscores the importance of owning gold as a valuable asset during periods of debt and inflation crises. Dalio explains that this is the primary reason why gold serves as a beneficial diversifier and why he includes some in his investment portfolio.

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2024-12-12 17:50