Why Ray Dalio believes Bitcoin will never be a “reserve currency”

[r_victory]

I believe he holds this opinion about Bitcoin because he's a traditional, "old-school" investor, so it's normal for him to be reserved when expressing his perspective on cryptocurrencies, especially Bitcoin. When he mentions volatility, he's not entirely wrong. If we consider the dollar or the euro, the variations are minimal. I'm not saying they're more valuable or more stable, but in business terms, it's possible to have greater control over the fluctuation; it's better for the financial management of a shop or restaurant owner, for example. No one has to agree, but don't take everything negative said about cryptocurrencies personally…

[el kaka22]

Are we really going to care about every single hedge fund guy ever? Like are we going to just ask about bitcoin to every single billionaire and make our moves based on that? This is silly, he is just another human, and just because he knows about stocks, doesn't mean he can understand bitcoin, hey may or he may not but him being a hedge fund guy has nothing to do with it. He is also quite old, which proves my point that he may not understand how bitcoin even works.

No need to care about what every single person says, we also have millions in the world who took bitcoin from a few dollars to over hundred grand, maybe start listening to what those people are saying about bitcoin.

[Dogedegen]

Let's analyze the arguments:
1) Bitcoin is not private as the ledger is public:

On a first glance that could be relevant for a central bank, because their decisions regarding Bitcoin purchases and sales would trigger important reactions on the market, and dealing with a "reserve asset" should avoid that.

But I believe this is not really important. Central Banks would probably have a contract with a service provider or several service providers who would hide all real transactions. Just like they do with gold: they don't buy it out of thin air. They have a lot of money to invest in mixing, CoinJoins, Lightning and other techniques. Only if Central Bank transactions would make up really a big part of the Bitcoin transactions, then this would be more difficult but not impossible.

There is an even simpler solution, a small adjustment in the way that things are disclosed and the problem solves itself. So instead of announcing that they intend to acquire some number of Bitcoin to expand the reserve, they only do so after the fact. I don't think the public has any say in this or is being asked anyway so there is no real harm of announcing it after the fact. Still I see your option as a good way, in essence a lot of transactions are already private. Nobody really knows everything that is going on in the OTC world, especially not from the perspective of an outside observer.

2) The code could be broken by government intervention (at least I have understood that argument that way):

I have myself argumented that if some government or central bank purchases too many Bitcoins, they could get influence on the Bitcoin code. Above all they could block or force soft forks which are not unanimously supported by the Bitcoin community.

If he means broken as in hacked then the argument is not smart. Government IT people can't even build a simple digital platform that properly implements cybersecurity standards that preserve privacy. They spend huge amounts of money on projects that barely achieve anything. If he talks about intervention as in influence over the code then that has a better chance but I don't think we are even 1% there. So I would categorize that as a maybe risk, not as a definitely a big risk.

However, I don't really expect that governments and central banks will hold more than 10-20% of all Bitcoins. That would be too few to really exercise control.

Even if they tried to acquire more than that it would still not get them control over it. I mean what would they do, threaten to dump if something got implemented or something didn't get implemented? I don't think that there would be coordination of this kind but it is possible.

3) Volatility.

This is from his earlier tweets. But volatility is decreasing practically since Bitcoin's first listing on an exchange. So I am quite optimistic that we'll reach gold-like volatility values in a few years (now BTC is about 1,5x to 2x as volatile as gold).

I think those that use this as an argument when it is not appropriate such as now as it is very low don't know what they are talking about. Most likely if volatility becomes extremely low they would write stuff like Bitcoin is not interesting anymore, its value won't appreciate, it is too stable. There is no winning with such type of people.

[Darker45]

Those are opinions. I don't find anything to really disagree with. Central banks may or may not adopt Bitcoin as a reserve currency. One of the reasons why some won't might be Bitcoin's transparency. That's how Ray looks at it. I agree, many central banks might find Bitcoin's public transaction records as disadvantageous to them.

~snip~

As far as I know, most central banks publicly disclose the amount of gold, foreign currency and many other assets in their national reserves. Everything is public and they are not shy about it, why should they be afraid of people knowing how many bitcoins they hold? I don't think bitcoin's transparency is a valid reason.

~snip~

Do you believe central banks are fully transparent? Do you believe in the hollow numbers they release to the public? Do you think they inform the public every time a certain asset is moved? Is there a way for the general public to verify it themselves?

The current setup of central banks requires a big amount of trust. To make the public trust them, audits are done. However, that doesn't necessarily remove the image that they're beyond reach. That's just basically telling us, "trust the auditors, we trust them."

Central banks are secretive. They're involved in discreet arrangements and operations. They move assets surreptitiously. Just recently, my government is accused of ordering the central bank to liquidate billions in gold reserve. The government says they're not doing that. Certain personalities stick to their claim. The central bank later on admitted they did that but it's part of its management strategy.

Bitcoin solves all of these problems. With a Bitcoin reserve, every Peter, John, and Mary could verify the exact amount kept in the reserve and each and every movement. And such is precisely the reason they don't like it.

[Abiky]

I don't know how much he has been into bitcoin or observed bitcoin price movement, saying that an asset that was $15k as at the beginning of two years ago, touched $126k last month and is currently experiencing a market correction at $87k and it is not a store of value?

He misses the point totally in bitcoin or he is trying to talk it down for him missing out on it when the prices were still cheaper. It surely makes sense to see bitcoin as money which has all valuable qualities that fiat doesn't have which includes limited supply and store of value despite its volatility, decentralization, censorship resistant among others.

Fiat doesn't come close to bitcoin price appreciation neither does gold. Countries, institutions and even banks are drifting towards bitcoin now because they see great value in it and if bitcoin was not good money, they wouldn't have such interest. I know for sure that Ray would speak from the other side of his mouth pretty soon and end up buying more bitcoin.

Exactly. He's not seeing the big picture. Measuring Bitcoin's value in the short-term is a huge mistake. Bitcoin is all about being a long-term store of value. And so far, it has performed pretty well since its inception. What Bitcoin's experiencing now, is just a market correction. Typical of what happens after a prolonged bullish period.

Believe it or not, Gold is also volatile (although at a lesser degree than Bitcoin) and it's admired by governments and banks worldwide. I'm pretty sure Bitcoin will become a "reserve currency" in the future. Big names like BlackRock, Strategy, Bank of America, JP Morgan, etc. are making their move. Increased accumulation of BTC by such entities tells us something big is coming. With crypto-friendly legislation being pushed in the US and abroad, it won't be long before Bitcoin becomes an integral part of the world's financial system. Just you wait and see.

[Rustam Meraj]

Exactly. He's not seeing the big picture. Measuring Bitcoin's value in the short-term is a huge mistake. Bitcoin is all about being a long-term store of value. And so far, it has performed pretty well since its inception. What Bitcoin's experiencing now, is just a market correction. Typical of what happens after a prolonged bullish period.

Believe it or not, Gold is also volatile (although at a lesser degree than Bitcoin) and it's admired by governments and banks worldwide. I'm pretty sure Bitcoin will become a "reserve currency" in the future. Big names like BlackRock, Strategy, Bank of America, JP Morgan, etc. are making their move. Increased accumulation of BTC by such entities tells us something big is coming. With crypto-friendly legislation being pushed in the US and abroad, it won't be long before Bitcoin becomes an integral part of the world's financial system. Just you wait and see.

Yes you are correct that it is big mistake to look at Bitcoin in light of fast price changes, since current changes are merely healthy market fix following huge rise, and Bitcoin has performed very well as safe way to keep value over years. Like Gold, small amount and independence of Bitcoin will make it global reserve currency in future, as giant financial companies such as BlackRock and large banks are already buying it much and governments are making good regulations, showing that Bitcoin is quickly becoming main part of global financial system.

[CryptoBuds]

Central banks are secretive. They're involved in discreet arrangements and operations. They move assets surreptitiously. Just recently, my government is accused of ordering the central bank to liquidate billions in gold reserve. The government says they're not doing that. Certain personalities stick to their claim. The central bank later on admitted they did that but it's part of its management strategy.

Bitcoin solves all of these problems. With a Bitcoin reserve, every Peter, John, and Mary could verify the exact amount kept in the reserve and each and every movement. And such is precisely the reason they don't like it.

I don't know what's going on in your country, but in capitalist countries, the government and the central bank are completely separate. Like in the United States, the Fed is an independent agency of the government and power is divided among the agencies, with no one agency having command or control over another. That means almost everything has to be open and transparent. Any major decision must be voted on and passed on the basis of bipartisan consensus. The Fed cannot secretly buy or sell national reserve assets without the consent of Congress or the members of the Fed. Not to mention, the Federal Reserve’s Board of Governors always has a balance between members of the Democratic and Republican parties.

Likewise, the ECB has nothing to do with European governments and operates completely independently, but it needs to be transparent to governments.

There will always be competition between parties in government and central banks, so they even need and like transparency, not fear it.

[Dogedegen]

Yes you are correct that it is big mistake to look at Bitcoin in light of fast price changes, since current changes are merely healthy market fix following huge rise, and Bitcoin has performed very well as safe way to keep value over years. Like Gold, small amount and independence of Bitcoin will make it global reserve currency in future, as giant financial companies such as BlackRock and large banks are already buying it much and governments are making good regulations, showing that Bitcoin is quickly becoming main part of global financial system.

The supply has nothing to do with something being a reserve currency. It can have a high supply, it can have a low supply, this does not have an impact on this. Otherwise I can offer you the super rare Dogedegencoin with a super small supply of 2 coins. Do you want to adopt it as a reserve currency at a price of $50 billion per piece?

I don't know what's going on in your country, but in capitalist countries, the government and the central bank are completely separate. Like in the United States, the Fed is an independent agency of the government and power is divided among the agencies, with no one agency having command or control over another. That means almost everything has to be open and transparent. Any major decision must be voted on and passed on the basis of bipartisan consensus. The Fed cannot secretly buy or sell national reserve assets without the consent of Congress or the members of the Fed. Not to mention, the Federal Reserve’s Board of Governors always has a balance between members of the Democratic and Republican parties.

I am sorry but you are still very naive and have the view of a child on a topic like this. Just because there is a legal apparent separation, that does not mean that there is a true separation of something. These are different things. These fantasies about independence are there to feed the sheep a narrative that has nothing to do with reality. It is time to start doing research and looking at things outside from the given view point from the status quo. The independence is an illusion, all of these entities are entirely corrupted already.

Likewise, the ECB has nothing to do with European governments and operates completely independently, but it needs to be transparent to governments.

Who do you think creates the ECB appointment? An independent panel of experts that proposes candidates to which they have no connection to and would not benefit from? LOL. The ECB president is nominated by the European Council and approved by the European Parliament. It is entirely dependent on the politicians and corrupt interests otherwise the old incompetent hag Christine Lagarde would never have gotten her job. It is the same story with Van Der Leyen, both are incompetent and deeply corrupt but these positions are given based on interests and corruption not on merit.
 

[Cookdata]

I believe he holds this opinion about Bitcoin because he's a traditional, "old-school" investor, so it's normal for him to be reserved when expressing his perspective on cryptocurrencies, especially Bitcoin. When he mentions volatility, he's not entirely wrong. If we consider the dollar or the euro, the variations are minimal. I'm not saying they're more valuable or more stable, but in business terms, it's possible to have greater control over the fluctuation; it's better for the financial management of a shop or restaurant owner, for example. No one has to agree, but don't take everything negative said about cryptocurrencies personally…

I have study this market very well and understand it better that when you see someone saying a lot about Bitcoin and has never for once acknowledge Bitcoin despite his differences you should know that the person is traditional bankroll to shill whatever traditional asset the group, companies or government are holding. They make a lot of noise on TL and when you summarize all they say, it's just bunch of gibberish and that's exactly what Ray dalio is doing.

You know one thing about this Bitcoin anti campaign, we have had a lot of them. Robert Kiyosaki told on the live that he bought Bitcoin at $9k and sold at $90k and he is considering using the money for some medical project and he plans on buying more. This were people that don't used to like Bitcoin but all join at some point. You see Dalio, he will come around, for now he is in denial stage.

[OgNasty]

It is hard to believe that Bitcoin could be the sole global reserve currency. Someone will always want control of the money. China with BRICS is looking for a more diversified basket of currencies to be the reserve, which I think does make a lot of sense. As much as we want Bitcoin to be the currency of the world, a lot could go wrong if that were the case.

[Darker45]

~snip~

I don't know what's going on in your country, but in capitalist countries, the government and the central bank are completely separate. Like in the United States, the Fed is an independent agency of the government and power is divided among the agencies, with no one agency having command or control over another. That means almost everything has to be open and transparent. Any major decision must be voted on and passed on the basis of bipartisan consensus. The Fed cannot secretly buy or sell national reserve assets without the consent of Congress or the members of the Fed. Not to mention, the Federal Reserve’s Board of Governors always has a balance between members of the Democratic and Republican parties.

Likewise, the ECB has nothing to do with European governments and operates completely independently, but it needs to be transparent to governments.

There will always be competition between parties in government and central banks, so they even need and like transparency, not fear it.

That's probably as far as the design is concerned. As expected, that's the ideal way of doing things. In reality, however, they aren't completely separate. In the first place, it's the president who handpicks and nominates individuals for Fed positions. It's politicians in the senate who confirm the nominees. It's congress to whom the Fed is accountable.

As far as openness and transparency is concerned, again, that's only true insofar as its design is concerned. In reality, it's not the case. If the Fed and congress, for example, agree on something but kept the agreement away from the public, that isn't open and transparent. But even members of congress are clueless on certain major decisions of the Fed.

Declassified Fed documents, FOIA-released documents, among others are providing indubitable proofs how the Fed is actually involved in secret deals. Have you not heard of the Fed's secret swap lines, secret gold leasing, secret bailouts, secret gold swaps, and so on? These are precisely the kind of Fed activities that prevents them to go for Bitcoin. They can't hide all these things with Bitcoin.

[asriloni]

What Dalio said totally makes sense. You can use Bitcoin as a store or your value, but using it as a reserve currency is inherently a bad idea. Volatility has always been its main problem. It would be madness to tie economy of county to something that is so volatile.

That's why it would better to use Bitcoin as an investment instead of reserves currency. When it comes to the reserves currency, it's talking country, not personal. This is also the reason is mostly of countries are owning Bitcoin, majority of it came from the seized asset, and not stockpilling it to use it as reserve.

[colinistheman]

Yes you are correct that it is big mistake to look at Bitcoin in light of fast price changes, since current changes are merely healthy market fix following huge rise, and Bitcoin has performed very well as safe way to keep value over years. Like Gold, small amount and independence of Bitcoin will make it global reserve currency in future, as giant financial companies such as BlackRock and large banks are already buying it much and governments are making good regulations, showing that Bitcoin is quickly becoming main part of global financial system.

Ray Dalio is not wrong in this case because he is talking about a reserve currency, not a store of value. These are two different concepts, and the top criterion of a reserve currency is stability. Meanwhile, bitcoin is highly volatile, so as long as it remains volatile, it is unlikely to become a reserve currency. It is the truth and we should not deny it.

Bitcoin is already part of the global financial system, and its role is becoming more and more important. But being part of the economy doesn't mean it's certain to become a reserve currency.
The criteria to become a currency or reserve asset are stability, high liquidity and being a neutral asset like gold, supply is not the main factor here.

[X-ray]

Are we really going to care about every single hedge fund guy ever? Like are we going to just ask about bitcoin to every single billionaire and make our moves based on that? This is silly, he is just another human, and just because he knows about stocks, doesn't mean he can understand bitcoin, hey may or he may not but him being a hedge fund guy has nothing to do with it. He is also quite old, which proves my point that he may not understand how bitcoin even works.

No need to care about what every single person says, we also have millions in the world who took bitcoin from a few dollars to over hundred grand, maybe start listening to what those people are saying about bitcoin.

Right on point, as good as ray dalio is as an investor and I don't even doubt his capability, the decision still on the current administration.

If bitcoin is recognized as a reserve it's a good news, otherwise no big deal. Bitcoin can grow under massive fud, it will also grow even without being reserve currency.

[Swordsoffreedom]

What Dalio said totally makes sense. You can use Bitcoin as a store or your value, but using it as a reserve currency is inherently a bad idea. Volatility has always been its main problem. It would be madness to tie economy of county to something that is so volatile.

That's why it would better to use Bitcoin as an investment instead of reserves currency. When it comes to the reserves currency, it's talking country, not personal. This is also the reason is mostly of countries are owning Bitcoin, majority of it came from the seized asset, and not stockpilling it to use it as reserve.

I don't know what his general views on bitcoin are, and even though I am a bitcoin investor, I have to agree that what he says is not as absurd as many people say.

You are right, it is madness to add it to national reserves and tie a nation's economy to it. Its volatility will cause many disadvantages, even terrible consequences for the economy, instead of bringing great benefits.

Just think, what would happen to the national economy if a recession occurred, the price of bitcoin dropped more than 50% causing national reserves to evaporate billions or even hundreds of billions of dollars? It is inevitable that the economy will fall into instability or even collapse.

Bitcoin is better suited as a speculative asset or store of value for individuals, but not suitable for application to national and larger economies. The national economy needs stability and Bitcoin clearly cannot provide that at the moment.

[hero_the_bossman]

Right on point, as good as ray dalio is as an investor and I don't even doubt his capability, the decision still on the current administration.

If bitcoin is recognized as a reserve it's a good news, otherwise no big deal. Bitcoin can grow under massive fud, it will also grow even without being reserve currency.

Even if BTC won't be a reserve currency globally on a national level, it can be one on a state level, like the news I heard of Texas buying some BTC for themselves, but I didn't check the details, fine print of such news usually diminish any progress, in fact

[purple_sparkles]

In my opinion, even if countries don’t adopt bitcoin as part of their national reserves, bitcoin won’t become worse than it is now. In fact, I even assume that if this does happen, the price won’t be as volatile as it is today, because there will definitely be manipulations used to support the price and create more stable market conditions.

[Danica22]

In my opinion, even if countries don’t adopt bitcoin as part of their national reserves, bitcoin won’t become worse than it is now. In fact, I even assume that if this does happen, the price won’t be as volatile as it is today, because there will definitely be manipulations used to support the price and create more stable market conditions.

They don't need to manipulate it and make it stable because to be the global reserve currency, stability is what bitcoin needs to achieve if that is its goal.

That's why I never want bitcoin to become a safe haven like gold, because then it will become stable and the returns will also decrease significantly. As an investor I really don't want that to happen to bitcoin, I don't want it to become stable. But it seems like many people don't understand that, they always want bitcoin to become a national reserve, to become a safe haven like gold.

What bitcoin needs to achieve is global acceptance and adoption, it doesn't need to become a currency or a national reserve asset.

[Dogedegen]

It is hard to believe that Bitcoin could be the sole global reserve currency. Someone will always want control of the money. China with BRICS is looking for a more diversified basket of currencies to be the reserve, which I think does make a lot of sense. As much as we want Bitcoin to be the currency of the world, a lot could go wrong if that were the case.

It does not have to be the sole one, as long as it is a major part of the reserve currencies that would mean that the ultimate game theory has worked. That would be a pretty big achievement.

What Dalio said totally makes sense. You can use Bitcoin as a store or your value, but using it as a reserve currency is inherently a bad idea. Volatility has always been its main problem. It would be madness to tie economy of county to something that is so volatile.

No it does not make any sense. It is clear that you didn't read a single post here before you wrote your response. Bitcoin's volatility is pretty low these days and a reserve currency does not tie the economy of the country to it. It is a reserve, not the working liquidity of a country. Its short-term volatility is irrelevant for a long term outlook.

That's why it would better to use Bitcoin as an investment instead of reserves currency.

No, this is the worst use case of Bitcoin. It is not meant to be an investment so that you can get more crappy fiat in return.

Ray Dalio is not wrong in this case because he is talking about a reserve currency, not a store of value.

He's absolutely wrong.

Meanwhile, bitcoin is highly volatile, so as long as it remains volatile, it is unlikely to become a reserve currency. It is the truth and we should not deny it.

None of this is true, stop writing nonsense. Bitcoin's volatility is pretty low these days and other reserve currencies are also quite volatile. Bitcoin is slightly more volatile, but there is no arbitrary cutoff point at which we say there is too much volatility.

Even if BTC won't be a reserve currency globally on a national level, it can be one on a state level, like the news I heard of Texas buying some BTC for themselves, but I didn't check the details, fine print of such news usually diminish any progress, in fact

A state level reserve would be a natural precursor to a national level reserve. It gives the whole thing more credibility and builds up a foundation for it to become a national reserve. Mind you Texas just bought $10 million worth of Bitcoin but that is pretty low. When states start having a reserve in hundreds of millions or billions then the game is on.

[Odusko]

Risks management is an essential part of the economy and for that reason, Dalio was right on the risks factor that comes with Bitcoin as a reserve assets, or currency, countries can hold Bitcoin as a store of value and that will be fine for them if the price volatilities Plays against the country speculation, but if it as a reserve currency, it definitely going to affect the value of their own national currency which is somewhat a flight risk for them.