Ray Dalio discloses allocating 1% to Bitcoin but warns of its difficulty in bearing the heavy responsibility of national reserves

Billionaire investor Ray Dalio recently stated in an interview with CNBC that Bitcoin cannot serve as a reliable national reserve currency due to technical vulnerabilities and price volatility. He emphasized that developments in quantum computing could pose a threat to Bitcoin’s encryption system, and disclosed that his personal Bitcoin holdings constitute about 1% of his investment portfolio.

Dalio reaffirmed gold’s safe-haven value during debt crises and warned that major economies such as the US, UK, and France are facing financial imbalances caused by excessive government debt issuance. This statement comes amid a backdrop where the total market capitalization of cryptocurrencies has fallen over 30% from its peak, offering a new perspective on the debate between traditional finance and digital assets as stores of value.

Dalio’s Skepticism Toward Bitcoin’s Reserve Currency Status

Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, questions Bitcoin’s reserve currency potential from the perspectives of technical security and regulatory policy. In a mid-December TV interview, he pointed out that Bitcoin’s distributed ledger system carries a potential risk of being broken by quantum computing: “When quantum computers become sufficiently advanced, government agencies or malicious actors could gain control of the network.” This technological fragility makes it difficult for Bitcoin to fulfill core functions of a national treasury reserve, especially in key scenarios like international settlement and value anchoring.

While acknowledging that he holds a small amount of Bitcoin as a diversification tool, Dalio emphasizes that his personal allocation is only about 1%. This cautious stance stems from his deep understanding of the dependence of digital currency systems: Bitcoin’s price volatility has long remained above 60%, and its transaction validation relies entirely on a global network of nodes, which could face disruption during extreme geopolitical conflicts or energy crises. By contrast, traditional fiat currencies, despite inflation issues, have the backing of national credit and enforcement power.

Dalio’s views align with assessments from some central bank digital currency (CBDC) researchers. The latest reports from the Bank for International Settlements (BIS) have indicated that Bitcoin’s anonymity conflicts fundamentally with anti-money laundering (AML) requirements, and its transaction throughput limit (7 transactions per second) is insufficient for international settlement needs. These technical bottlenecks and policy hurdles together create a “glass ceiling” for Bitcoin’s mainstream reserve asset ambitions. Although small economies like El Salvador have experimented with Bitcoin, the likelihood of major economies adopting Bitcoin as a reserve asset remains very low.

Dalio’s Core Argument Breakdown

Technical Risks

• Quantum Computing Threat: encryption could be cracked by future quantum computers

• Network Dependence: fully reliant on internet infrastructure

• Regulatory Uncertainty: significant variations in global regulatory frameworks

Market Characteristics

• Annual Volatility: consistently oscillates between 60%-150%

• Liquidity Depth: two orders of magnitude lower than gold markets

• Settlement Efficiency: about 10-minute block confirmation time

Comparative Advantages

• Gold: physical stability spanning millennia of history

• Fiat Currency: backed by state coercive power enabling enforceable payments

• CBDC Outlook: multiple countries are developing central bank digital currencies

Comparative Advantages of Gold as a Reserve Asset

As a store of value tested over thousands of years, gold holds a central position in Dalio’s asset allocation framework. He highlights three unique properties of gold: its stable physical and chemical nature, which does not depend on digital systems; its globally recognized value standard; and its intrinsic monetary attribute independent of sovereign credit. These characteristics make gold especially valuable amid a global debt exceeding $300 trillion, serving as a preferred hedge against currency devaluation.

From a market structure perspective, gold also exhibits significant liquidity advantages over Bitcoin. Data from the London Bullion Market Association shows that the global daily spot gold trading volume exceeds $150 billion, whereas Bitcoin’s daily spot volume is approximately $30 billion, primarily concentrated during US trading hours. This liquidity gap directly impacts the efficiency of large-scale asset allocation: central bank-level gold transactions can be quickly executed over-the-counter, while equivalent Bitcoin transactions could trigger significant market impacts—crucial for institutions managing trillions in foreign exchange reserves.

Gold’s industrial and ornamental uses provide intrinsic value support, a feature difficult for pure digital assets to replicate. According to the World Gold Council, about 50% of annual gold demand is for jewelry, with industrial uses (electronics, medical, etc.) accounting for 10%. This diversified demand structure has historically contributed to gold’s resilience during financial turmoil: for instance, in early 2020 during the pandemic outbreak, gold quickly recouped its losses within three months, while Bitcoin experienced declines exceeding 50%.

Asset Allocation Logic Amid Global Debt Crisis

Dalio’s warnings during the interview about government debt issues are pointing to systemic risks. The latest data from the International Monetary Fund (IMF) show that global government debt has surpassed $90 trillion, with US federal debt reaching 130% of GDP, and the UK and France at 108% and 115%, respectively. The debt expansion has outpaced economic growth, forcing central banks to maintain low interest rates and distorting traditional asset pricing models.

The vicious cycle of debt monetization is eroding fiat currency purchasing power. Dalio’s concept that “debt is money, and money is debt” is particularly relevant here: issuing new debt to repay old debt effectively dilutes the currency’s value. During the inflation cycle of 2022-2024, this dynamic was evident: US M2 money supply grew by 40%, while gold priced in USD increased by 28%, and Bitcoin’s volatility exceeded 200%, highlighting its instability as a measure of value.

Problems in private capital markets further amplify financial fragility. Dalio notes that private equity and venture capital face exit difficulties: in 2024, global IPO counts declined by 35% year-over-year, and M&A transaction volumes shrank by 20%. This liquidity crunch, combined with the widespread use of leveraged financial products, creates a dangerous environment where a major credit event could trigger cross-market contagion. In such conditions, non-credit correlated assets like gold will become even more valuable.

The Crypto Community’s Theoretical and Practical Responses

In response to Dalio’s criticisms, experts in the cryptocurrency space have offered multi-layered rebuttals. Bitcoin core developers emphasize that the network is actively developing quantum-resistant cryptographic schemes; for example, alternative signature algorithms based on lattice cryptography are in testing phases. Supporters of Bitcoin also point out that over its 14-year history, there has been no breach of its core cryptographic protocols, whereas traditional banking systems suffer annual losses exceeding $100 billion due to cyberattacks.

On the practical side of reserve assets, case studies of microstates provide alternative perspectives. Besides El Salvador, the Central African Republic in 2023 adopted Bitcoin as legal tender. Although the IMF repeatedly warns of policy risks, data from the two countries’ treasury departments show that Bitcoin remittance systems have reduced cross-border payment costs by over 60%. These real-world benefits suggest that when evaluating Bitcoin’s reserve function, it is important to distinguish between developed countries and economies with weak financial infrastructure.

Institutional investors are displaying a mixed picture. Despite Dalio’s cautious stance, giants like BlackRock and Fidelity continue to push forward with Bitcoin spot ETF applications in 2024, and global crypto investment funds reached a record high of $78 billion in November. This increased institutional participation, contrasted with cautious comments from authorities, reflects ongoing market exploration of the optimal allocation ratio for digital assets—perhaps a 1%-5% range is becoming a consensus among professional investors.

Dalio’s skepticism about Bitcoin’s reserve currency capacity reveals fundamental differences between traditional finance thinking and crypto-native perspectives on store of value. The debate touches not only on technical security and market volatility but also on conflicts over monetary sovereignty and the philosophy of decentralized finance. Against the backdrop of expanding global debt and accelerating technological revolutions, the competition between gold and Bitcoin may not be decided immediately, but this discussion will prompt deeper reflection on the core features of ultimate value carriers.

FAQ

What are Dalio’s main reasons for believing Bitcoin is unsuitable as a reserve currency?

Dalio mainly worries about risks from quantum computing attacks, excessive price volatility, and reliance on network infrastructure, which make it hard for Bitcoin to meet the stability and security requirements of national reserves.

Does Dalio completely reject investing in Bitcoin?

He remains cautious but has allocated about 1% of his portfolio to Bitcoin, viewing it as part of diversification rather than a reserve-level asset.

What unique advantages does gold have compared to Bitcoin?

Gold offers physical stability, a globally recognized value standard, independence from digital systems, industrial utility, and a millennia-long history—traits that pure digital assets currently cannot replicate.

How does the global debt crisis influence asset choice logic?

Rising government debt dilutes fiat currency value, leading investors to favor non-credit-linked assets; however, Bitcoin’s high volatility limits its safe-haven role, whereas gold remains more stable in such environments.

How does the crypto community respond to Dalio’s criticisms?

Crypto experts highlight ongoing development of quantum-resistant cryptography, emphasize practical value in cross-border payments, and note that continued institutional involvement suggests ongoing exploration of its appropriate role in portfolios.