- Hedge fund titan Ray Dalio revealed he owns ether and explained why cryptocurrencies are impressive.
- Crypto is an alternative in an environment where the value of cash is falling, the Bridgewater Associates CIO said.
- He called cash the “worst investment” and a “problematic asset” that will lose 4-5% to inflation.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
The billionaire investor was a skeptic about the bitcoin “bubble” for years, but a change of heart this year saw him buy the leading cryptocurrency.
“I’m not going to give the precise amount of bitcoin or – but I do own some ethereum, as well,” he told Andy Serwer. “I don’t own a lot of it.”
Dalio – the founder and co-chief investment officer of the world’s biggest hedge fund, Bridgewater Associates – told Yahoo he’s a huge advocate of diversification, and cryptocurrencies make up “a relatively small part” of his portfolio.
He explained why he thinks digital assets are a good investment.
“I view it as an alternative money in an environment where the value of cash money is depreciating in real terms,” he said.
“And I think it’s very impressive that for the last 10-11 years, that programming has still held up. It hasn’t been hacked and so on. And it has an adoption rate.”
Financial mainstream adoption of bitcoin is continuing to grow. Meanwhile, the promise of decentralized finance, or DeFi – to cut traditional banks and other middlemen out of transactions – has boosted interest in ethereum.
The cryptocurrencies soared to new record highs in November, as institutional money started flowing into the digital token economy.
So far this year, bitcoin and ether have risen 62% and 420%, respectively, according to data from TradingView. But they have pulled back recently, with bitcoin trading 3.5% lower and ether down 5.4% on Friday.
Those developments have silenced or changed the minds of crypto critics such as Howard Marks, as well as Dalio himself.
The billionaire, who’s previously compared cash to trash, reiterated his dislike for fiat money by calling it the poorest investment. The debasement of fiat money – a result of governments’ unprecedented fiscal stimulus to help economies through the pandemic – has made assets like bitcoin look more inflation-resistant, he argued.
“Cash – which most investors think is the safest investment – is I think, the worst investment,” Dalio said in the interview.
“Don’t judge anything in your returns or your assets in nominal terms, in terms of how many dollars you have. View it in terms of inflation-adjusted dollars,” he added.
“And so cash – like, this year, you’ll lose 4% or 5% to inflation. And so pay attention to those, because I believe that that’ll be the worst investment.”
In November, the rate of inflation in US consumer prices reached its highest level in nearly 40 years. Dalio, who has called cash a “very bad asset,” noted sky-high inflation would whittle away at its buying power.
“The message is: cash is going to be a problematic asset,” he said.
“Hold that other diversified portfolio of assets – keep it, looking at it in real terms, not nominal terms. And that diversification should be also international diversification from countries, not just asset classes, in order to have a truly well-diversified portfolio.”
Read More: A particle physicist-turned crypto founder breaks down why ethereum layer-2 scaling solutions will be a big deal in 2022 – and shares why developers are sticking with ethereum despite the rise of other layer-one platforms this year