American billionaire and hedge fund manager Ray Dalio has recommended a 15% portfolio allocation into Bitcoin or gold to optimize for the “best return-to-risk ratio” in light of America’s crippling debt problem and currency devaluation.
“[If] you were optimizing your portfolio for the best return-to-risk ratio, you would have about 15% of your money in gold or Bitcoin,” the founder of hedge fund firm Bridgewater Associates said during an appearance on the Master Investor podcast on Sunday.
Dalio said he has “some Bitcoin, but not much,” and is still “strongly preferring gold to Bitcoin,” however.
But the exact split between Bitcoin (BTC) and gold “is up to you,” Dalio said. His 15% suggestion marks a sharp increase from the 1% to 2% Bitcoin allocation he recommended in January 2022.
Dalio’s comments were made in the context of America’s national debt crisis, which has ballooned to $36.7 trillion, US Treasury data shows.
“The issue is the devaluation of money,” Dalio said while pointing out that the US government will likely need to issue another $12 trillion worth of Treasurys over the next year to service its mounting debt.
Latest US Treasury report reflects Dalio’s point
A US Treasury report released on Monday projected another $1 trillion in new borrowing in the third quarter — $453 billion more than previously estimated — due to weaker cash flows and lower reserves.
The Treasury also expects to borrow $590 billion in Q4, adding to the US government’s growing reliance on debt to fund budget expenses and worsening concerns about its future fiscal path.
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Dalio noted that other Western countries — including the United Kingdom — face the same “debt doom loop” issue and that their currencies will continue to underperform relative to hard currencies like Bitcoin and gold — which he described as an “effective diversifier.”
Dalio still skeptical about Bitcoin becoming a reserve currency
Despite advocating for Bitcoin as a portfolio diversifier, Dalio remains skeptical about its potential to serve as a reserve currency. He expressed doubt that any central bank would adopt the cryptocurrency in such a role, citing its lack of privacy and the transparent nature of its transactions.
“Governments can see who is doing what transactions on it,” he said, suggesting that any potential vulnerabilities in Bitcoin’s code may undermine its effectiveness as an alternative money.
Bitcoin and gold hit recent highs
Bitcoin and gold are performing strongly in the current economic climate, hitting respective highs in recent months.
Bitcoin is currently trading at $118,100 — around 4% below its July 14 all-time high of $123,230, TradingView data shows — while gold has reached new highs multiple times over the past few months.
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