Ray Dalio, co-chief investment officer of Bridgewater Associates, one of the world’s largest hedge funds, owns Bitcoin, but in a maintenance with CNBC On Wednesday, he demonstrated that he still doesn’t understand or believe in it as a store of value greater than gold.
Dalio believes governments can kill the distributed Bitcoin network around the world, but he hasn’t commented on how that might be possible.
“I think in the end, if it’s really successful, they’ll kill him and they’ll try to kill him.” And I think they’re going to kill him because they have ways to kill him, ”Dalio told Andrew Sorkin on CNBC“Squawk Box” at the SALT conference in New York.
While regulations for Bitcoin will surely grow in the years to come, and popular entry and exit ramps for investing may need to tighten their restrictions or shut down completely in some regions, it is impossible to stop transactions. Bitcoin.
Dalio generalized: “You have El Salvador taking care of it and you have India and China getting rid of it. And you have the United States discussing how to regulate it and it could still be controlled. ”
Dalio’s statement grossly underestimated the fact that El Salvador adopted Bitcoin as legal tender, putting Bitcoin in direct competition with the dollar as its currency in that country. It’s important to note that while Bitcoin is arguably the strongest asset in the world, the dollar maintains its hold as the world’s strongest currency.
Additionally, China hasn’t gotten rid of Bitcoin at all. They recently banned Bitcoin mining, which turned out to be a rather ill-conceived attack on the network, resulting in the removal of China 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 flaw in the thinking of many mainstream investors and Keynesian economists. Nothing has intrinsic value. Objective value does not exist. The value is completely subjective, as most Bitcoiners would readily admit.
The idea that value is subjective is often echoed by economists who try to create constant measures where there really are none. This misunderstanding stems from the envy of physics. It comes from Keynesian economists who claim economics is hard science. It’s not.
“There are so many things in a historical perspective that had no intrinsic value and that had perceived value. And then it got hot and it got cold. It could be anyway. You just have to know what it is. It could be tulips in Holland, ”said Dalio.
Still, the lack of knowledge hasn’t stopped the billionaire investor from buying Bitcoin as a hedge against inflation, which would indicate that he understands that Bitcoin is one, if not the best store of value in the space. , time and scale.
“I think it is worth considering all the alternatives to cash and all the alternatives to other financial assets. Bitcoin is one possibility. I have a certain amount of money in bitcoin.
In conclusion, Dalio admitted: “It is an incredible accomplishment to have brought [Bitcoin] from where this programming occurred to where it stands through the test of time.
Still, the investor made it 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,'” said Dalio in another interview with CNBC, “I would choose gold.”
Why he is wrong
While gold has always been a hedge against fiat inflation, bitcoiners believe that Bitcoin has subsumed gold in its functions, virtues, and necessity.
Bitcoin is more salable in space, time and scale than gold. Bitcoin’s issuance will stop at 21 million coins, while gold will be mined until none exists anywhere in the universe. The only thing limiting the inflation of the gold supply is the amount of resources we devote to the task of mining it, and on that front we’ve barely scratched the surface of the earth.
One explanation for Dalio holding gold on Bitcoin as a store of value is a mistaken belief that Bitcoin will simply be banned by the US government. Bitcoin as a network and currency, however, is resistant to government capture, unlike gold.
Indeed, as we have seen time and time again in China and India, Bitcoin can be regulated, but it cannot be stopped. Governments have no control over the protocol and no power to stop, modify or confiscate Bitcoin transactions.
At the same time, the physical nature of gold and the inability to store it safely make it easily confiscable by third parties and governments. Note that all standard good delivery gold bars must be held by a third party to be recognized as valid, and the vast majority of investor gold is held in banks.
As of now, Dalio just doesn’t view Bitcoin as a store of value, which is arguably his strongest and one of his most obvious virtues:
“I just think of it as diversification,” he said.