Cryptocurrencies are offering traders protection against the debasement of fiat money, but pose a serious risk of losing the bulk of the investment, Ray Dalio, the founder of the world’s largest hedge fund believes.
“To have invented a new type of money via a system that is programmed into a computer and that has worked for around 10 years and is rapidly gaining popularity as both a type of money and a storehold of wealth is an amazing accomplishment,” Bridgewater Associates boss wrote in a note to clients published on the company’s website.
The American billionaire added that the entire world of big investments currently boasts few alternative gold-like assets, and said the need for such assets is rising dramatically.
However, Dalio highlighted the double-edged sword of cryptocurrencies, as bitcoin is able to both make an investor “very rich” and yet “disrupt the existing monetary system” at the same time. Moreover, he said, digital assets are vulnerable to being hacked.
According to the veteran investor, who calls bitcoin a “long-duration option on a highly unknown future,” investing in cryptocurrency means recognizing the potential to sustain losses of around 80 percent.
Dalio also noted that, since a limited number of bitcoins can be mined, there is nothing to stop new coins from being created.
“I assume that better ones will come along and displace this one,” he said.
The billionaire also said that the more restrictions are put on the usage of Bitcoin, the more chance “demand for it would plunge.”
“Rather than it being far-fetched that the government would invade the privacy or prevent the use of bitcoin and its competitors, it seems to me that the more successful it is, the more likely these possibilities would be,” Dalio said.
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