Ray Dalio, co-chief investment officer of Bridgewater Associates, one of the largest hedge funds in the world, owns some bitcoin, but revealed in an interview with CNBC on Wednesday that he still doesn’t consider it to be a superior store. understands or believes in value to gold.
Dalio believes governments can kill the globally distributed Bitcoin network, but he has not commented on how it could be possible.
“I think if it is really successful at the end of the day they will kill it and try to kill it. And I think they’re going to kill it because they have ways to kill it, “said Dalio Andrew Sorkin in CNBC’s” Squawk Box “at the SALT conference in New York.
While regulations for Bitcoin are sure to evolve in the years to come, and popular investment entrances and exits in some regions may have to tighten their restrictions or close them altogether, it is impossible to stop Bitcoin transactions.
Dalio generalized, “El Salvador is doing this and India and China are getting rid of it. And the United States is talking about how to regulate it and it could still be controlled. ”
Dalio’s statement grossly understated the fact that El Salvador adopted Bitcoin as legal tender, which puts Bitcoin in direct competition with the dollar as a currency in that country. It’s important to note that while Bitcoin is arguably the world’s strongest asset, the dollar retains its position as the world’s strongest currency.
In addition, China did not get rid of Bitcoin at all. They recently banned bitcoin mining in what turned out to be a pretty ill-conceived attack on the network, which resulted in China being removed as a serious contender for bitcoin’s global hash rate.
During the interview, Dalio also said that Bitcoin has no intrinsic value. This is a fundamental mistake made by many traditional investors and Keynesian economists. Nothing has any intrinsic value. There is no objective value. The value is completely subjective, as most Bitcoiners would like to admit.
The idea that value is subjective is often parroted by economists trying to create constant metrics where there really aren’t any. This misunderstanding arises from the envy of physics. It comes from Keynesian economists who pretend economics is a hard science. It is not.
“There are so many things from a historical perspective that had no intrinsic value and had a perceived value. And then it got hot and it got cold. It could be either way. You just have to know what it is. It could be tulips in Holland, ”said Dalio.
Nonetheless, a lack of knowledge hasn’t stopped the billionaire investor from buying Bitcoin as an inflation hedge, suggesting that he understands that Bitcoin is one, if not the best store of value in terms of space, time, and size.
“I think it’s worth considering all of the alternatives to cash and all of the alternatives to the other financial assets. Bitcoin is one possibility. I have a certain amount of money in Bitcoin. ”
In conclusion, Dalio admitted: “It is an amazing achievement that we have done [Bitcoin] from the place where this programming took place to where it is, through the test of time. “
Still, the investor has made it very clear that he believes gold is a better store of value.
“If you put a gun to my head and say, ‘I can only have one,'” Dalio said in another interview with CNBC, “I would choose gold.”
Why he’s wrong
While gold has historically been a hedge against fiat inflation, bitcoiners believe that bitcoin subsumed gold in its functions, virtues, and necessities.
Bitcoin is easier to sell than gold over space, time and size. Bitcoin issuance will stop at 21 million coins while gold is mined until it no longer exists anywhere in the universe. The only thing limiting gold supply inflation is the amount of resources we are investing in mining, and on that front we have barely scratched the surface of the earth.
One explanation for Dalio holding gold as a store of value above Bitcoin is the mistaken belief that Bitcoin will simply be banned by the US government. However, unlike gold, bitcoin as a network and currency is resistant to government intervention.
As we have seen again and again in China and India, Bitcoin can be regulated, but not stopped. Governments have no control over the protocol and no power to stop, change, or confiscate Bitcoin transactions.
At the same time, the physical nature of gold and the impracticality of keeping it safe make it easy to confiscate by third parties and governments alike. Note that all Good Delivery standard gold bars must be held in third party custody to be recognized as valid, and the vast majority of investors’ gold is held in banks.
Right now, Dalio just doesn’t see Bitcoin as a store of value, which is arguably its strongest and one of its most obvious virtues:
“I just see it as diversification,” he said.