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Investor Ray Dalio prefers Bitcoin: 'Cash is still trash'

 


Billionaire investor and hedge fund manager Ray Dalio has repeated his earlier statement that “cash is garbage”. The Bridgewater Associates founder called stocks "lower quality" and said he prefers "digital gold like Bitcoin" instead.


"Of course, cash is still junk," Dalio said. "Do you know how quickly cash loses its purchasing power?" The investor spoke on the CNBC squawk box during the recent World Economic Forum (WEF) meeting in Davos, Switzerland.


"When I say cash is garbage, I mean all currencies that are related to the euro or related to the yen," Dalio explained. "All of these currencies will depreciate relative to the goods and services, just like they did in the 1930s."


Dalio is the founder of one of the world's largest hedge fund firms, Bridgewater Associates. The company manages around 223 billion US dollars. In January 2020, the 72-year-old American investor advised people to diversify their portfolios. Best of all, by "getting out of the cash," which he described as "junk" at the time.


Bitcoin as “digital gold”

In Davos, Dalio spoke on a range of topics including stocks, the global economic outlook and the US Federal Reserve's efforts to fight inflation . He said stock markets were too crowded and that "stocks are cheaper" compared to cash.


"Everyone is after stocks and everyone wants everything to go up," said the investor. “The more people hype it, the more it becomes a financial asset that belongs to someone else. It doesn't work though, so there will be a negative real return environment."


For the billionaire, Bitcoin (BTC) is the preferred form of investment at a time of global economic uncertainty. His list of safe investments also includes real estate and precious metals like gold.


"I think blockchains are great," Dalio explained. He touted the potential of cryptocurrencies as a solution to what could be a tough year for the US economy. This year could be marked by high inflation and a lack of real returns on investments. He further said:


“Let's just call it digital gold. I think that a digital gold, a kind of bitcoin , is something that has a small advantage over gold and over other assets.”


Spotlight on bitcoin as an inflation hedge

Bitcoin is considered a gold-like store of value. In 2020, many believed that BTC would evolve from a risky speculative asset to a version of gold in the crypto market. Previously, Bitcoin 's correlation to gold had risen to an all-time high.


However, this argument may have faltered with the massive decline in crypto markets this year. Bloomberg data shows that the correlation between BTC and gold dropped to almost zero earlier in the year. As bitcoin prices fell over the following months, the price of gold continued to rise.


In April, the 50-day correlation coefficient for BTC and gold was minus 0.4. That's the lowest reading since 2018, according to Bloomberg. A reading of 1 means assets are moving in lockstep. Minus 1 means exactly the opposite.


The crypto markets are becoming increasingly correlated with the stock market, particularly to top-tier tech stocks like Apple, Amazon, and Microsoft. More than $1.5 trillion has already vanished from crypto markets this year.


Dalio predicts 'demand pressures'

On bonds, Dalio said, “The Federal Reserve will sell, individuals will sell, foreigners will sell and the US government will sell because it needs to fund its deficit. So there will be a supply/demand problem. That means there will be a shortage.”


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