Biggest Hedge Fund Manager in The World Warns "Bitcoin Is A Bubble", Says Gold Is Money
(September 20, 2017 - by Tyler Durden)
Bridgewater Associates founder Ray Dalio, the 68-year-old founder of the world’s largest hedge fund (160 billion under management), said bitcoin is "in a bubble" during an interview on CNBC Tuesday morning, arguing that the so-called currency is too difficult to spend, and too volatile to be a useful store of value. Dalio stated in August 2017 that Bridgewater has made a large-scale commitment to gold ownership.
During the interview, Dalio argued that most investors who buy the digital currency do so with the hope of making a quick speculative profit, undermining bitcoin’s functionality as a currency.
“There are two things that are required for a currency. The first thing is that you can transact in it, it’s a medium of exchange. The second thing is it’s a store of value. Bitcoin today…you can’t spend it very easily.
In terms of a storehold of wealth, it’s not an effective storehold of wealth because it has volatility to it. Unlike gold, let’s say, which reflects the value of money, its more stable than the value of money, bitcoin is a highly speculative market.”
Dalio added that he doubts that governments will allow bitcoin transactions to remain anonymous in perpetuity. The IRS has sued Coinbase, a popular US bitcoin exchange, demanding records on client transactions – a decision that many in the community saw as the beginning of the US government’s effort to unmask the currency’s users. Aleady, using sophisticated blockchain analysis techniques, US authorities have been able to trace bitcoins back to their respective owners, making it more difficult for tax cheats and money launderers to use the digital currency to facilitate their crimes.
“The idea that it will be private in terms of transaction…in other words people won’t know what you’re doing and it will be a private currency…is really questionable.”
Based on the amount of speculation alone – the price of a single coin has risen by more than 300% since the beginning of the year – Dalio argues that the only logical conclusion is that bitcoin is in a bubble.
“We take these criteria, and we define a bubble based on those criteria, bitcoin is a bubble. It’s a shame – it could be a currency, it could work conceptionally, but the amount of speculation that’s going on and the lack of transaction, the idea that it will be private in terms of transaction…is really questionable if you look at what’s gone on in terms of governments to examine it.”
Bitcoin also faces competition from other digital currencies like Ethereum, which compounds the problem of investing in digital currencies, in Dalio’s view.
“And then there are other cryptocurrencies. Bitcoin might lose competition to other cryptocurrencies. So is it a bitcoin bet that we’re making or a cryptocurrency bet. It’s very much speculative people thinking can I sell it at a higher price…and so it’s a bubble.”