Ray Dalio Is Wrong On Bitcoin And Crypto

First of all, I respect Ray Dalio and his firm, Bridgewater Associates. There are few investment managers with such an exceptional 45-year track record as his and Bridgewater’s. I’ve been a little surprised over the years at his anti-crypto stance because he’s big on “uncorrelated return streams” and crypto provides that and will even more so in the future as more tokens launch. The other day, he spoke out assertively against Bitcoin. The idea that Bitcoin will be “outlawed”, but central bank stablecoin digital currencies will thrive is a bit confusing. As the FED and central banks around the world issue their respective digital currencies, they’ll be stablecoins and could disintermediate the many stablecoins out now, I suppose — so maybe that’s his point? But, it seems as central banks go digital, it will be accelerating the global economy towards cryptocurrencies. People will hold their country’s stablecoin digital currency in their digital wallet, and they’ll be able exchange into Bitcoin, Ethereum, Bitcoin Cash, or other tokens — whatever they want. The idea that governments will “outlaw” it because it will get too big — I don’t really follow that. Bottom line, going digital, governments will be able to better track people and ensure the right taxes are paid — so that seems good for governments.

Dalio saying it will be a felony to own Bitoin seems very speculative coming from a place I don’t totally understand from him. Again, I think it is actually the opposite. Governments will have their currencies digital. Governments allowing exchange in and out of other cryptocurrencies will enable innovation for the good of society and good tracking for reasons of tax collection, public safety, and national security. If Dalio thinks that governments will outlaw crypto because everybody will transfer into other cryptocurrencies and not hold a government’s stablecoin, I think that’s what Dalio means? That is an interesting discussion and would be an indictment of a government’s management of that currency — the fact that people would not even want to hold it. It seems like if governments started trying to prosecute people who wanted to invest in crypto — that would mean things are pretty bad in whatever country tried to do that. I’m not sure if Dalio is pushing this very dystopian view of our future global economy?

Finishing here on an optimistic note, fundamentally, I’m not sure Dalio understands how crypto transactions will work in the future — which would be surprising considering his mastery of how transactions and debt work in our traditional economy. The FED and other country’s digital stablecoins will be the centerpiece of the future crypto economy. So, his volatility concerns are entirely addressed by understanding this point with respect to transactions occurring in stablecoins. Crypto will stimulate innovation from all companies and entrepreneurs as they’ll be able to crowdfund and the best ideas will get rewarded from the people deciding what they want— society will benefit as progress should increase. As societies become better and more prosperous (enabled by crypto), governments will collect more tax revenue and people will be happier — good for governments.