Billionaire investor Ray Dalio has advised investors to allocate 15% of their portfolios to “store-of-value” assets like Bitcoin and gold, warning of a potential ‘debt doom loop’ in the United States. The Bridgewater Associates founder’s comments come as the US national debt surpasses $35 trillion, with interest payments consuming 14% of federal revenue.
Debt spiral threatens dollar stability
Dalio’s warning centres on what he describes as a self-reinforcing cycle where rising debt drives higher interest payments, forcing more borrowing. The investor notes that debt-to-GDP now exceeds 120%, a level historically associated with currency crises. “When creditors lose confidence in a currency’s purchasing power preservation, they flee to alternatives,” Dalio stated in his latest market observation.
Bitcoin and gold as parallel systems
The hedge fund manager’s proposed 15% allocation breaks down to:
- 10% in physical gold (ETF or direct ownership)
- 5% in Bitcoin through regulated custodians
This mix aims to hedge against both inflationary pressures (gold’s traditional role) and systemic banking risks (Bitcoin’s decentralised nature). Dalio particularly emphasized Bitcoin’s “asymmetric upside” given its fixed supply, while acknowledging gold’s 5,000-year store-of-value track record.
Institutional adoption accelerates
Dalio’s comments coincide with major financial players deepening crypto exposure:
- BlackRock’s Bitcoin ETF now holds $18.2 billion in assets
- JPMorgan launched blockchain-based collateral settlements
- Sovereign wealth funds reportedly accumulating BTC silently
Gold meanwhile, has seen central bank purchases hit record levels, with 2024 acquisitions on pace to exceed 2023’s 1,037-ton haul.
Market reactions and alternatives
While some analysts question whether retail investors should mirror Dalio’s approach, the advice reflects growing mainstream acceptance of alternative assets. “Even a 5% Bitcoin allocation would have turned negative bond returns positive since 2020,” noted Fidelity’s crypto research head. Others suggest including inflation-linked bonds and select commodities for more balanced protection.
Long-term implications
Dalio’s warning underscores a broader reassessment of the dollar’s dominance as:
- BRICS nations expand gold-backed trade settlement
- Bitcoin becomes legal tender in more jurisdictions
- Treasury auctions show weakening foreign demand
The investor stopped short of predicting dollar collapse but stressed “every fiat currency in history has eventually returned to its intrinsic value—zero.” His 15% prescription aims to ensure against what he sees as inevitable monetary system evolution.
REFH – Newshub, 29 July 2024
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