A clever chain with global fame, but too much risk for reserve game.”
Ray Dalio, the founder of Bridgewater Associates and a billionaire investor, has explained why he thinks Bitcoin won’t be a significant reserve asset for central banks.
Recent podcast with Nikhil Kamath, a businessman and co-founder of Zerodha.
Dalio started off by calling Bitcoin “one hell of an invention” and an important development in financial technology.
However, he claimed that when selecting reserve assets, central banks consider a variety of factors, and Bitcoin does not entirely satisfy those requirements.
Privacy and government control are important issues. Dalio clarified that central banks should not use Bitcoin’s traceable and public blockchain. Generally speaking, governments desire strict control and confidentiality over their reserves.
Dalio asserts that central banks are unlikely to rely on an asset that they are unable to completely control or manage.
He also highlighted the dangers of long-term vulnerability. Dalio noted that the cryptographic security of Bitcoin might be compromised by upcoming technologies like quantum computing.
Central banks like assets with little long-term uncertainty, even if this risk is only hypothetical at the moment.
Extreme volatility is a further major issue. The price of bitcoin frequently fluctuates dramatically in brief intervals. For the purpose of managing financial systems and safeguarding national wealth, central banks require steady and predictable assets.
In contrast to assets like gold or the US dollar, Dalio claimed that Bitcoin’s price fluctuations make it unreliable as a stable store of value.
Finally, Dalio highlighted the short history and lack of inherent support for Bitcoin. Although Bitcoin and digital gold are occasionally contrasted, gold has been a reliable store of value for more than 5,000 years.
In comparison, Bitcoin is still relatively new and hasn’t been put to the test during lengthy economic cycles.
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