Crypto experts push back after billionaire hedge fund manager Ray Dalio renews skepticism of bitcoin arguing that the largest and oldest cryptocurrency lacks the qualities that make gold a reliable store of value.
Speaking on the All-In podcast, the Bridgewater Associates founder said bitcoin should not be compared to gold because it lacks central bank support, offers limited privacy and could face an existential threat from future advances in quantum computing. Dalio also pointed to the asset’s public ledger, suggesting that transactions can be monitored and potentially controlled.
Dalio, who said last year that he had about a 1% allocation to bitcoin, is not new to criticism of the digital asset. At the time, he said Bitcoin faced challenges as a global reserve asset due to its traceability and potential vulnerabilities in quantum computing.
However, industry figures say these criticisms reflect long-standing debates around bitcoin and that the risks highlighted by Dalio are already reflected in bitcoin’s much lower market value compared to gold.
The risks of Bitcoin are also its advantages
However, some analysts say these critiques explain exactly why Bitcoin is worth buying.
“Dalio is absolutely not wrong,” Matt Hougan, chief investment officer at asset manager Bitwise, told CoinDesk. “There is definitely some risk with quantum and central banks are not buying bitcoin yet.”
But Hougan said those concerns are precisely why bitcoin still trades well below, about 4%, the total size of the gold market. Bitcoin’s market capitalization currently stands at around $1.4 trillion, compared to gold’s $35 trillion.
“This criticism is literally an opportunity,” he said. “We invest in Bitcoin because we believe these things will change over time; that developers will solve quantum risk and central banks will come in their place.”
“If these criticisms did not exist, bitcoin would already cost $1 million a coin,” he added.
Old “tired” stories
Alex Thorn, head of research at Galaxy, said Dalio’s arguments echoed older narratives from Bitcoin’s early years.
“Ray Dalio’s critiques of Bitcoin are reminiscent of tired narratives from the pre-2017 era,” Thorn said in an email, adding that quantum risks are already being considered by developers.
Read more: Here’s why the quantum threat to Bitcoin might be smaller than people fear
He also said that comparing Bitcoin to gold is fair, but does not account for the difference between the two assets in practice. “Gold may work well stored in a bunker or at the New York Fed, but Bitcoin has real utility in the real world in a way that gold could never match,” he said, highlighting the asset’s growing adoption by individuals and institutions for nearly two decades.
Monetary change
Matthew Sigel, head of digital assets research at VanEck, said gold and bitcoin “have a role” because they represent durable assets from different monetary eras.
“Ultimately, this is a debate between the monetary architecture of the last century and that which is emerging in this century,” he said in an email.
He said gold solved the trust problem in an “analog” financial system built around declared reserves and custodians. Meanwhile, Bitcoin solves this problem in a digital environment through open source development and verifiable transactions.
He added that central banks – like the Czech National Bank – are already starting to experiment with digital asset exposure and that privacy improvements are emerging through better wallet practices and second-layer networks.
Sigel also pushed back on concerns related to quantum computing, saying the problem affected the entire financial system rather than just bitcoin. “Quantum risk is a broader cryptographic challenge facing the entire financial system, not a flaw unique to Bitcoin,” he said.
Investor surveys, he said, also show that younger investors are increasingly favoring bitcoin, suggesting a gradual shift in the “money center.”
Read more: ‘Big Short’ Michael Burry spots 2022 vibes in Bitcoin crash
