Ray Dalio says 'there is only one gold' as bitcoin outperforms gold during worst geopolitical crisis in years

Dalio's Critique of Bitcoin

Ray Dalio, founder of Bridgewater Associates, expressed his views on bitcoin during the All-In Podcast, arguing that it should not be compared to gold. He cited several reasons for his stance, including bitcoin's lack of central bank support, absence of privacy, and potential long-term threats from quantum computing. Dalio asserted, "There is only one gold," emphasizing its status as the most established money and the second-largest reserve currency held by central banks.

Market Performance Contrasts Dalio's Thesis

The timing of Dalio's comments coincided with a significant market divergence. On the day he spoke, gold experienced a 3% decline, dropping $168 to $5,128. In contrast, bitcoin fell less than 1%, decreasing by 0.7% to $68,700. This occurred during a period of heightened geopolitical tension, specifically five days into the U.S.-Iran war, where the asset Dalio favors saw a sharper decline than bitcoin.

The performance of bitcoin and gold has diverged since early October. After moving in tandem from July through early October, the crypto market crash in October led to the liquidation of $20 billion in leveraged positions. Since then, bitcoin has fallen over 45% from its peak, while gold has rallied 30% to over $5,100 during the same period.

Both assets showed volatility during the recent geopolitical events. Gold initially spiked following the initial strikes but gave back gains as concerns shifted to oil disruption. Bitcoin sold off on Saturday, saw a bounce on Sunday after the death of Iran's supreme leader Khamenei, was rejected at $70,000 on Tuesday, and has since stabilized in the mid-$67,000s. Neither asset has consistently acted as a safe haven this week, though bitcoin has exhibited less volatility, contrary to Dalio's predicted framework.

Dalio's Specific Concerns and Diversification Strategy

Dalio's criticisms of bitcoin are not new. He has previously highlighted bitcoin's transparency, noting that transactions can be monitored and potentially controlled. He also questioned the likelihood of central banks accumulating an asset that operates on a public ledger and raised quantum computing as a future existential risk.

Despite his criticisms, Dalio does hold a portion of his portfolio in bitcoin for diversification, allocating approximately 1% to the cryptocurrency. In July, he recommended a 15% allocation to either bitcoin or gold, citing the "best return-to-risk ratio" in light of the U.S. debt trajectory.

Broader Economic Context

Dalio previously warned that the U.S.-led "World Order" had "broken down," advising investors to reconsider their wealth protection strategies. The market is currently debating whether gold remains the sole prescription for such protection, and recent price action has not strengthened Dalio's argument.