Trash Talk on Cash and Bitcoin?

Famous hedge fund manager Ray Dalio made an annoucement at Davos 2020 that "Cash is Trash". Even though he hesitated because he said that he didn't want to seem bullish on gold, he stated that gold is likely a better investment at the moment which we might agree on. But the problem is when the interviewer asked about Bitcoin.

First, I'm a huge fan of Ray Dalio and his book Principals; plus like that we are both ENTPs. But when listening to Dalio, realize that he has a position in gold and a large put option on the S&P. Due to high corporate debt levels and an inflated market, he likely feels there is going to be a correction in the near future. But in regards to crypto, it sounds like Dalio may be out of touch. Dalio shoots down Bitcoin and says it would be better to invest in something like Libra which isn't even available. Facebook and other co-partners are still trying to push the idea through congress for acceptance while we are seeing a number of the Libra Association member companies backing out. I was a little suprised by his recommendation as it showed his lack of knowledge in this space.

He was right regarding some issues with Bitcoin as a currency. A currency should remain stable and freely transferable which Bitcoin is not but there are other stable coins available that may solve this problem. We'll likely still see Bitcoin as an important asset. Similar to gold, Bitcoin is a store in value with it's value based on the limited supply and cost to produce. If the speed and cost of using Bitcoin becomes more efficient we could see a big change. Keep in mind cryptocurrency asset manager Grayscale revealed an inflow of $600 million in investment capital for 2019. It's been considered the first sign of institutional money into crypto and will only get bigger.

Cash is being seen as trash because the increased supply of dollars is devaluing the currency thus why we see every asset class increasing in unison. Cheap money is moving to assets, even in things like real estate. It's typical to see wealth transfer from asset class to class depending on the economy, risk level, and yield. But in a low interest rate environment where rates of returns are fairly low across the board, were seeing things move up together. It's possible due to the quantitative easing that we may see asset prices remain inflated as many are still sitting on the sidelines waiting for any sign of a dip with cash in hand. It's possible that this could be the new norm; hopefully not for those waiting to invest. If this is the new norm, it will only be a period of time before we see localized inflation on goods and services finally catch up. We are definitely in a unique time.

In my opinion, dollar cost averaging and diversification is really the only safe bet and for me, this would include crypto.

Note: This is not an offer to sell or the solicitation of an offer to buy securities or other instruments mentioned. I do not represent any of the affiliate links, brands, or companies mentioned. Cryptocurrency is a speculative and high-risk investment with the potential for loss. This article is for informational purposes only and is not to be seen or used as financial, tax, or legal advice. Please consult a professional adviser and tax accountant prior to any investments.