My humble take on Dalio's BTC post
Updated: Feb 23, 2021
"I suspect that Bitcoin’s biggest risk is being successful, because if it’s successful, the government will try to kill it and they have a lot of power to succeed." - Ray Dalio
Late last week, Bridegwater’s Ray Dalio revealed his views on Bitcoin and its like. My takeaways – admittedly including some “reading between the lines” subjectivity – are:
1. Though BTC supply is fixed, so are its characteristics. It can be assumed that new assets will do the job better than BTC and therefore arguing that BTC is valuable b/c its supply is fixed is like arguing the same about BBYs (they were replaced by iphones). The counter is that gold is like other metals, so gold supply is unlimited. One commentator said “It’s like assuming the wheel will be replaced by something more round”.
2. BTC is held in non-private ways (on exchange vs. in cold storage) and it is a public ledger. These holdings are vulnerable to hacking and invasions of privacy.
3. BTC is vulnerable to government banning.
While I don’t see (2) as being a limiter, (1) and (3) are big problems. Simpler rather than more complex substitutes for BTC would threaten its monopoly. The question is whether BTC becomes a parallel currency or is effectively replaced.
But (3) appears to me to be fatal. Governments don’t like it when private currencies gain favor with the citizenry, and generally ban and replace. History provides many examples, including what is very likely the world’s first fintech, which you can read about here.
However, if BTC can remain an asset (like gold - you don't take out a chunk of gold to pay for a coffee) rather than threaten as a medium of exchange, I see now reason why BTC will attract harsh regulatory blowback. And even so, I'm not sure a ban on holding it could actually be enforced.
Photo credit: Web Summit - HM1_7481, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=74255790