Bitcoin News Today: Dalio Warns of Dollar's Slow Death: Investors Turn to Gold and Bitcoin as Hedge

Debt-driven challenges in the U.S. dollar are fueling a growing interest in alternatives like cryptocurrencies, with billionaire investor Ray Dalio identifying crypto as a potential hedge against the erosion of fiat currency’s value. Dalio, the former CEO of Bridgewater Associates, has warned that the U.S. and other reserve-currency issuers are nearing the end of a long-term “big debt cycle,” a period marked by increasing debt burdens and diminishing returns on traditional stores of value such as the dollar and U.S. Treasuries [1]. His analysis suggests that if demand for the dollar declines or its supply rises—driven by continued monetary interventions like quantitative easing—investors may increasingly turn to crypto as a more reliable alternative [2].

Dalio has emphasized the limitations of fiat currencies in maintaining value, particularly in the face of growing debt and inflationary pressures. The U.S. government, he points out, currently spends $7 trillion annually while generating only $5 trillion in revenue, creating a $2 trillion deficit each year. To cover its obligations, the government must sell approximately $12 trillion in new debt over the coming year, with interest payments already accounting for half of the annual deficit [2]. This trajectory, according to Dalio, risks undermining the dollar’s role as a global reserve currency and could accelerate the transition to assets with limited supply, such as Bitcoin and gold.

Gold, already a significant reserve asset, has seen renewed demand from central banks and governments, with international holdings of the U.S. dollar falling to their lowest level since the 1990s. Gold now accounts for 24% of global reserves, the highest percentage in 30 years. At the same time, Bitcoin has outperformed gold in recent performance, with prices doubling in a 12-month period compared to a 42% increase for gold [3]. This trend reflects a broader shift toward “hard money” assets that resist devaluation through inflation or excessive monetary printing.

Dalio’s warnings align with a broader investor sentiment that traditional financial markets are becoming less trustworthy. He has advised investors to allocate around 15% of their portfolios to Bitcoin or gold, citing a potential “classic devaluation” of fiat currencies similar to historical episodes in the 1930s and 1970s [2]. His rationale is based on the growing debt loads of key economies and the diminishing purchasing power of reserve assets, which have contributed to the rising appeal of alternative stores of value.

The shift toward hard assets also appears to reflect skepticism about the long-term stability of central bank policies. Dalio argues that while central banks face difficult choices—either allowing interest rates to rise and trigger defaults or continuing to expand the money supply—both options pose risks to the dollar’s credibility. He has also noted that stablecoins, which are often backed by U.S. Treasuries, pose little systemic risk if properly regulated, but the underlying issue remains the declining value of the Treasuries themselves [2].

Investor preferences for Bitcoin and gold highlight a broader trend in asset allocation, with both assets seeing significant inflows amid economic uncertainty. Dalio’s comments reinforce the idea that the global financial landscape is undergoing a structural change, driven by the limitations of fiat currency and the search for assets that retain value over time. As debt levels climb and inflationary pressures persist, the appeal of crypto as an alternative to traditional currencies may only continue to grow.

Source:

[1] Ray Dalio Reveals What Will Make Crypto Attractive (https://u.today/ray-dalio-reveals-what-will-make-crypto-attractive-alternative-currency)

[2] Ray Dalio Breaks Down What Could Make Crypto Outshine (https://cryptonews.com/news/ray-dalio-explains-what-could-make-crypto-outshine-dollar/)

[3] Phil Rosen's Post (https://www.linkedin.com-posts/philrosen_theres-a-reason-why-gold-and-bitcoin-prices-activity-7368757052082438145-98UV)