Ray Dalio, founder of investment firm Bridgewater Associates doesn’t find potential in Bitcoin because according to him it’s still very volatile. According to him, the world’s leading cryptocurrency doesn’t fulfill the role of a medium of exchange.
“There are two purposes of money a medium of exchange and a store hold of wealth and bitcoin is not effective in either of those cases now,” Dalio said on Tuesday at the World Economic Forum in Davos, Switzerland.
Bitcoin he said is still “too volatile” to be a store wealth and because of that, you can’t go for it.
But unlike Bitcoin, Dalio finds potential in fiat pegged stablecoin Libra, social media giant’s so-called cryptocurrency project. “I would say Libra or something which is as more stable value has got more potential,” said Dalio.
Dalio argues that central banks aren’t gonna hold digital gold, Bitcoin as a reserve rather gold which is tried and true as a reserve currency for a thousand years.
“Cash is trash,” Diversify your portfolio with Gold
He emphasizes on using a bit of gold as a diversifier along with stock in the technology disrupting companies.
This is because “Cash is trash,” Dalio said. “Get out of cash. There’s still a lot of money in cash.”
According to Dalio, people can’t “jump into” cash because the governments are going to print money, turning it into the trash. The currency fiat monetary system is all about “print whatever amount of money you want.”
Dalio’s firm Bridgewater manages $160 billion and he has made his declaration about cash before as well. In 2018, he said those holding cash were “going to fell pretty stupid” for missing the market run.
What investors should do is dump cash for a diversified portfolio. For a diversified portfolio, he advises to be global and have a balance. For this balance, he recommends adding gold in your portfolio or something that’s hard, reiterating his call from last year that precious metal will be a top investment in the years to come.
No effective monetary policy for Next Downturn
Although Dalio doesn’t think there will be an economic downturn this year, investors should look beyond the 2020 US presidential election, he said.
“If you get a downturn – and there’s a good probability in the next [presidential] term you’ll get a downturn – and you don’t have effective monetary policy and you have people at each other’s throats, I’m worried about that,” Dalio said.
The Federal Reserve according to Dalio is no longer in a position where it co stimulate the US economy like the past by lowering interest rates.
“You used to push a button and it would go up,” he said.
But the economy won’t be able to bounce back as it has in the past if the interest rate continues to fall. “We’re going to have larger deficits which we’re going to print money for,” Dalio said. “At a point in the future, we still are going to think about what’s a store holder of wealth. Because when you get negative-yielding bonds or something, we are approaching a limit that will be a paradigm shift.”
