Ray Dalio Changes Sentiment Towards Bitcoin
In a recent article, supported by an auxiliary research report, Ray Dalio, Co-Chairman & Co-Chief Investment Officer of Bridgewater Associates, articulates his current opinion on Bitcoin’s role as an investment vehicle and its potential to serve as a ‘storehold of wealth’ within investors’ portfolios. While the full written piece makes several insightful points, Dalio’s change in sentiment on Bitcoin’s legitimacy as an asset, and indeed other monetary cryptoassets as an asset class more generally, is perhaps the most significant takeaway readers should note. Until recent months, Dalio, one of the world’s most successful asset managers, had expressed an overtly negative opinion of BTC and its peers, at least in its ability to function as anything other than a speculative vehicle. While this latest article does not necessarily represent a sudden change in stance, the admission that BTC could function as an option on becoming a ‘digital gold’ and that BTC appears to be on the path towards becoming a viable storehold of value and type of money, is undoubtedly significant.
The article makes several other noteworthy points. For one, the authors (Dalio et al.) argue that Bitcoin will likely be replaced by other digital currencies that can innovate and respond to market changes more dynamically than Bitcoin can: Dalio sees Bitcoin as unable to ‘evolve’. While not an explicit criticism of its governance structure, this point does appear to take aim at Bitcoin’s perceived rigidness and resistance to protocol changes.
Dalio goes on to argue that proponents of the value of Bitcoin’s fixed supply are perhaps misguided, in so far as the proliferation of alternative digital currencies, or monetary cryptoassets, dilutes the supply relative to the demand for digital storeholds of value, a bucket which Bitcoin and its rivals would all compete for. Indeed Dalio’s hypothesis echoes other market observer’s sentiments, noting the ability of Bitcoin forks as well as similar cryptoassets to attract and maintain substantial market valuations.
Although the authors note the growing market demand for Bitcoin and other cryptoassets, they stress that large institutional market players, which Bridgewater itself would classify as are hindered in their participation primarily due to legislative unclarity, still yet immature custodial infrastructure, and insufficient market liquidity.
Nonetheless, despite his reservations, Dalio observes that BTC and its peers are fast becoming treated by market participants as a form of money and a storehold of wealth. Given the respect for Dalio within the industry and the size of Bridgewater’s holdings, his shift in perspective is apt to have consequences for how willing asset managers in traditional markets are to explore or consider Bitcoin and other cryptoassets as legitimate portfolio components. Much like Paul Tudor Jones’ comments in December 2020, this most recent report and commentary, despite not representing an endorsement, further legitimizes the crypto markets as an option for institutional investors.