on the crypto
After the recent inflationary concerns and monetary policy positions announced by the US government, Dalio has moved closer to the concept of Bitcoin as a store of value and is starting to take it into greater consideration than some traditional vehicles such as government bonds.
Inflation takes hold
After a long time, the economy is recovering from the pandemic, bringing with it the problem of supply shortages across the board. It is a cautious time for investors with large cash reserves or treasury bills, as in a time of high inflation, their nominal purchasing power will drop rapidly.
Ray Dalio, just like most of the cryptocurrency world, believes Bitcoin will fare better than bonds in an inflationary era like the one we are in now. The narrative that Bitcoin is an inflation hedge has yet to be proven in practice, but the economic theory is solid. Provided there is a sustained level of demand, a reduction in supply will inevitably lead to an increase in prices.
One point of contention, however, is the legitimacy of Bitcoin's claim: how much of it is speculative / mania-fueled and how much comes from manipulation? This, of course, depends on how much fundamental utility Bitcoin can hold once the bubble dust settles.
Bitcoin's biggest challenge
Dalio states: "Bitcoin's biggest risk is its success." As Bitcoin gains popularity as a viable alternative store of value, away from both the hands and eyes of the government, it will begin to be seen as a legitimate threat to authority. This is already happening as regulations creep in - however, a potential death blow could occur if the U.S. government bans cryptocurrencies altogether.
At the heart of the cryptocurrency ecosystem is the fact that people can move fiat to cryptocurrency (and crypto to fiat) quickly and easily using centralized exchanges. Governments would be trivially able to ban these exchanges from functioning, which would cut a great deal and utility for cryptocurrencies as a whole.
The more successful Bitcoin gets as a vehicle for investment, the larger it becomes a target for world governments wishing to keep their grip on money (and therefore, power).
The way to go
As Bitcoin skeptics slowly turn into supporters, the way to go is both promising and arduous. Adoption rates are slowly increasing and it becomes more and more tempting as the weeks go by.
Michael Burry not long ago predicted that a massive Weimar-like inflation rise was about to hit the United States and took massive short positions in government bonds. It may be time for Bitcoin to prove its worth, as a climate like this has never been seen before in its short life.
Max Kaiser, the host of Keizer Report, said Dalio's move will cause the rest of the industry to "stay on the line." He suspects that international funds, particularly in Norway and Qatar, will soon announce "large positions" in Bitcoin.
