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What Ray Dalio gets wrong about Bitcoin

Bridgewater Associates Founder & Co-Chairman/Co-CIO Ray Dalio speak onstage during TechCrunch Disrupt San Francisco 2019 at Moscone Convention Center on October 02, 2019 in San Francisco, California.
Bitcoin podcaster Stephan Livera breaks down what billionaire Ray Dalio gets right and wrong about the most popular cryptocurrency. (Source: Getty)

Ray Dalio, one of the world’s most successful hedge fund managers and investors, has been asked his opinions on Bitcoin in a recent interview.

In fairness to Dalio, he does not hold himself out as an expert on Bitcoin, but nevertheless, let’s walk through what he gets right, and where he’s a bit confused.

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What Dalio gets right

Dalio mentions in a CNBC 'Squawk Box’ interview that it is worthwhile considering alternatives to cash, presumably this is given the higher inflation environment that we’re entering into nowadays in the COVID era, and Dalio’s interest in diversification.

The mere fact that he even holds Bitcoin is important, as Dalio is highly influential in the world of investors, and he will likely influence other investors to also purchase Bitcoin.

We have seen similar results with other investors who start with a small allocation, and slowly raise that allocation percentage over time.

Paul Tudor Jones, another American billionaire hedge fund manager, mentioned a 1 per cent allocation to Bitcoin in 2020, and in 2021, he mentioned a 5 per cent allocation to Bitcoin.

What Dalio gets wrong

The commentary on Bitcoin being shut down, “because they have ways of killing it” is misguided. There’s not much to stop or shut down, given that Bitcoin use, development and operation is decentralised.

Bridgewater Associates Founder, Co-Chief Investment Officer & Co-Chairman Ray Dalio speaks during the Web Summit 2018 in Lisbon, Portugal on November 7, 2018. ( Photo by Pedro Fiúza/NurPhoto via Getty Images)
Bridgewater Associates Founder, Co-Chief Investment Officer & Co-Chairman Ray Dalio. (Photo by Pedro Fiúza/NurPhoto via Getty Images)

Attempting to stop Bitcoin in one given country means Bitcoin use will go to other countries. We should also recall that attempts to stop Bitcoin use have previously not been successful in other countries, like Nigeria, Pakistan, or India.

Trying to shut down Bitcoin might be about as successful as the War on Drugs, which is to say not very successful. It’s fundamentally a monetary technology that billions of people around the world need, they just might not realise it yet.

Government bans may just end up proving to people that yes, they really do need to own some Bitcoin.

Dalio’s confused commentary around intrinsic value also sticks out sorely. There is no such thing as intrinsic value, all value is subjectively perceived.

But if we were to try and think in those terms, surely Bitcoin’s “intrinsic value” is the monetary qualities it has, such as its strictly limited supply, the capability for cost effective final settlement anywhere around the world, and the ability to use it under adversarial conditions are what give it value in the eyes of holders and users.

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The silver lining in all this

The broader conversation and popularisation of the term ‘fiat money’ in recent years has helped people understand the reason and value of Bitcoin. Fiat means ‘by decree’, where Bitcoin adoption is for the most part, done voluntarily and by choice.

As the ‘fiat money’ conversation occurs, it’s only natural for people to also discuss concepts such as hard money (more limited in supply e.g. Gold or Bitcoin), or the concept of sound money which refers to money chosen by the market and free of government intervention.

As the people of the world enter a higher inflationary environment, the conversation around Bitcoin will only grow. Sooner or later, the whole world will be stacking sats as it is the only viable savings technology.

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Stephan Livera hosts one of the world’s top Bitcoin podcasts (Stephan Livera Podcast), and he is also Managing Director, Swan Bitcoin International. Follow him on twitter @stephanlivera.