In a recent blog entry, Ray Dalio hinted at potential support for Bitcoin’s growing value based on the information he presented.
According to Dalio, there are two essential functions of money: serving as a medium for exchange and providing a safe haven for wealth accumulation. Currently, the frontrunners in this regard include the US dollar, euro, Japanese yen, and Chinese renminbi. However, an important consideration is that these currencies are all linked to debt. Consequently, when you possess these currencies, you’re essentially holding debt obligations.
The straightforward fact is brought to attention by him: when there’s a significant chance that loans won’t be repaid or will be paid back with worthless currency, faith diminishes. When a nation is burdened with excessive debt, its central bank may respond by printing more money to alleviate the strain, resulting in devaluation.
Gold sets itself apart from other assets. Unlike cash and bonds, it doesn’t rely on debt. When inflation occurs, it tends to retain its value better than these alternatives. Central banks and investors find gold appealing due to its ability to withstand debt defaults and inflation. In fact, gold ranks as the third most commonly held reserve, following major currencies.
Currently, cryptocurrencies function similarly to gold as they are both forms of non-debt money. Some may contend that gems or art serve comparable roles due to their non-debt, portable, and accepted status as value holders. However, Dalio’s perspective hones in on established financial security measures.
When the financial system functions smoothly and there are no debt or inflation issues, governments effectively handle their monetary responsibilities, and the value of their currencies remains stable. In such situations, financial assets are robust. However, when instability arises, as per Dalio’s perspective, gold can be an excellent asset to hold due to its protective role as a hedge and diversifier in investment portfolios. Please note that this is not a recommendation for direct investment but rather his personal viewpoint on financial markets.
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2024-04-19 11:25