Billionaire investor Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, has shared his latest investment strategy, emphasizing the role of cryptocurrencies like bitcoin and ether in a well-diversified portfolio. In interviews with Yahoo Finance and Marketwatch, Dalio reiterated his long-standing warning that cash is 'trash' and the worst investment because it steadily loses purchasing power to inflation.
Cash Is the Worst Investment: Inflation Eats Away Buying Power
Dalio argued that most investors mistakenly view cash as the safest asset, but in reality it is the most dangerous. 'Cash, which most investors think is the safest investment, is, I think, the worst investment, and that is important because it loses buying power,' he said. He noted that holding cash this year already results in a 4% to 5% loss due to inflation. His advice: never judge returns or assets in nominal dollar terms; always think in inflation-adjusted dollars.
Cryptocurrency as an Alternative Money
Regarding bitcoin, Dalio remarked: 'I think it's very impressive that, for the last 10, 11 years, that programming has still held up. It hasn't been hacked and so on. And it has an adoption rate.' He views cryptocurrency as 'an alternative money in an environment where the value of cash money is depreciating in real terms.' Dalio previously admitted owning bitcoin, and reportedly also holds ether (ETH), though he disclosed neither the amount nor the specific allocation, saying 'I don’t own a lot of it.'
Diversification: International and Multi-Asset
The billionaire stressed the importance of diversification beyond traditional asset classes. 'I'm very big on diversification,' he said, adding that investors should diversify not only by asset class but also by country to achieve a truly resilient portfolio. He views crypto as a small component of that mix: 'I view crypto as a small piece of that. And the message is cash is going to be a problematic asset, and hold that other diversified portfolio of assets.' He also noted that correlations change with economic cycles — bonds outperform stocks during downturns — making balance essential.
Risks and Warnings: Government Crackdown Potential
Despite his positive view on bitcoin, Dalio cautioned that the digital asset faces significant headwinds. 'If it is a threat to governments, it will probably be outlawed in some places when it becomes relatively attractive. It may not be outlawed in all places. I don't believe that central banks or major institutions will have a significant amount in it,' he said. He compared bitcoin to gold, calling gold 'the well-established blue-chip alternative to fiat money' while noting bitcoin has its own unique issues. Overall, Dalio recommends a modest allocation to cryptocurrencies as part of a broader, inflation-adjusted, globally diversified portfolio.