Dalio talked about the robustness of Bitcoin, which has not received a hack for over ten years. Bridgewater specialists raised potential challenges for Bitcoin in the future.
The well-known author and investor Ray Dalio, published this Thursday, January 28, in the Daily Observations of Bridgewater Associates newsletter, the document “What I think about Bitcoin.” In the paper, Dalio expresses that he wants to make his position on Bitcoin clear. He notes that many media have distorted the opinions about the first cryptocurrency in previous statements.
Dalio also refers to Bitcoin as a great invention that has worked without interruption for more than a decade.
Dalio talked with prudence regarding the fact that bitcoin is in limited supply. He argues that “although there is a limited supply of bitcoin, the supply of bitcoin-like assets, its competition, plays a role in determining the prices of bitcoin and other cryptocurrencies.”
Another feature of Bitcoin under Dalio’s criticism is the security of the funds. He argues that cold storage is difficult, and few people do it.” Being digital and connected, “[Bitcoin] is unprotected against cyber risks, in my understanding. I wish someone would correct me, if not,” says Dalio.
For a more detailed examination of the attributes and challenges of Bitcoin, Dalio presented a study of a team of Bridgewater specialists, led by Rebecca Patterson, which highlighted the considerable appreciation of bitcoin, such as its limited supply and global interchangeability, and said that Bitcoin cannot be seen, at least for now, as a store of value.
Despite this warning, specialists mention the low-interest rates that detract from the bonds’ diversification potential as an asset and the increasing risk of depreciation of national currencies.
Bitcoin as a Store of Value is a Never-Ending Discussion
The bitcoin price rally that began in 2020 reignited discussions about whether it is really “digital gold,” the document says. The 2017 rally was very speculative, while, from mid-2019 to late 2020, bitcoin’s noticeable appreciation appears with the idea of bitcoin as “digital gold,” the authors say.
The limited supply of bitcoin, although questioned by Dalio, receives highlights from Patterson as “a desirable feature at a time when central banks print money aggressively.”
The report shows that gold has been efficient in diversifying portfolios with stocks and bonds that reach 60% and 40%, both with increasing returns and contributing to a reduction and eventual falls of undiversified portfolios.
Over the past five years, bitcoin outperformed gold in both returns and neutralizing portfolio declines. Since it has only been on the list of a limited number of portfolios from 2014-2015, It is still early for bitcoin’s final resolution, says the study.
Bitcoin is not a store of value. The study highlights its sudden volatility, regulatory uncertainty, and immature infrastructure.
By: Jenson Nuñez
