Crypto experts retreat after billionaire hedge fund manager Ray Dalio renews his skepticism about bitcoin and argues that the largest and oldest cryptocurrency lacks the qualities that make gold a reliable store of value.
Speaking on the All-In Podcast, the Bridgewater Associates founder said bitcoin should not be compared to gold because it lacks central bank backing, offers limited privacy and could face an existential threat from future advances in quantum computing. Dalio also pointed to the asset’s public ledger, suggesting that transactions can be monitored and potentially controlled.
Dalio, who last year said he has about a 1% allocation to bitcoin, is not new to criticism of the digital asset. At the time, he said bitcoin faces challenges as a global reserve asset because of its traceability and potential vulnerabilities from quantum computing.
But industry figures say these criticisms reflect long-standing debates surrounding bitcoin, and that the risks Dalio highlighted are already reflected in bitcoin’s much smaller market value compared to gold.
Bitcoin’s risks are also its upside
However, some analysts say these criticisms are exactly why bitcoin is worth buying.
“Dalio is not ‘wrong’ in any absolute sense,” Matt Hougan, chief investment officer at asset manager Bitwise, told CoinDesk. “There’s really some risk with quant and central banks really aren’t buying bitcoin yet.”
But Hougan said these concerns are precisely why bitcoin still trades well below, around 4%, gold’s total market size. Bitcoin’s market cap currently sits at around $1.4 trillion, compared to gold’s estimated $35 trillion.
“This criticism is literally the opportunity,” he said. “We invest in bitcoin because we believe these things will change over time; that developers will solve quantum risk and central banks will come around.”
“If these criticisms didn’t exist, bitcoin would already be at $1 million per coin,” he added.
‘Tired’ old tales
Alex Thorn, Galaxy’s head of research, said Dalio’s arguments echo older narratives from bitcoin’s early years.
“Ray Dalio’s Bitcoin criticism is reminiscent of tired narratives from the pre-2017 era,” Thorn said in an email, adding that quantum risks are already being addressed by developers.
Read more: Here’s why the quantum threat to bitcoin may be less than people fear
He also said that comparing bitcoin to gold is fair, but overlooks how the two assets differ in practice. “Gold may work well stored in a bunker or at the New York Fed, but Bitcoin actually has real-world utility in ways that gold could never match,” he said, pointing to the asset’s growing adoption by both individuals and institutions over nearly two decades.
Monetary shift
Matthew Sigel, head of digital assets research at VanEck, said both gold and bitcoin “have a role” as they represent hard assets from different monetary eras.
“Ultimately, this is a debate between the monetary architecture of the last century and the one emerging in this one,” he said in an email.
Gold, in his view, solved the trust problem in an “analog” financial system built around reported reserves and custodian banks. Meanwhile, bitcoin addresses it in a digital environment through open source development and verifiable transactions.
He added that central banks — like the Czech National Bank — have already begun experimenting with digital asset exposure, and that privacy improvements are emerging through better wallet practices and second-layer networks.
Sigel also pushed back on the quantum computing concern, saying the problem affects the entire financial system rather than bitcoin alone. “Quantum risk is a broader cryptographic challenge facing the entire financial system, not a flaw unique to bitcoin,” he said.
Investor surveys, he said, also show that younger investors are increasingly favoring bitcoin, suggesting a gradual shift in the “monetary center.”
Read more: ‘Big Short’ Micheal Burry detects 2022 vibes in bitcoin crash
