Ray Dalio, founder of Bridgewater Associates, has raised concerns over the mounting US national debt, warning that it poses a greater threat to the dollar’s global reserve status than deregulation.
This trend, he argues, is pushing investors toward alternative stores of value like gold and bitcoin.
Debt pressures threaten the dollar
In recent written responses to the Financial Times, Dalio stated that fiscal excesses in the US and other major economies are eroding trust in fiat currencies as dependable stores of wealth.
He emphasized that this dynamic is driving capital inflows into gold and bitcoin, much as seen during previous periods of monetary instability.
Dalio explained:
“The dollar and the other reserve currency governments’ bad debt situations are threatening to their appeals as reserve currencies and storeholds of wealth, which is what has been contributing to the rises in gold and cryptocurrency prices.”
He noted that, while he does not expect bitcoin to entirely replace the dollar, it has already established itself as a viable alternative thanks to its limited supply of 21 million coins.
Dalio has previously recommended that portfolios allocate up to 15% in gold or bitcoin, and disclosed that he personally holds bitcoin.
Stablecoins and treasury exposure
Addressing concerns around stablecoins, Dalio downplayed the risk of their exposure to US Treasurys, suggesting that systemic risk is unlikely if stablecoins are properly regulated.
He did, however, caution that stablecoins’ reliance on Treasurys makes them sensitive to broader US fiscal health.
Era of major upheaval ahead
Dalio described the current environment as a late-stage debt cycle, in which policymakers face difficult choices between raising rates or printing more money.
He warned that the interaction of debt, politics, climate, and AI could bring “huge and unimaginable changes over the next five years.”
