Ray Dalio Believes That Governments Will Ban Bitcoin Sooner or Later, and He Is Wrong
Bitcoin cannot be stopped.
In the world of finance, Ray Dalio is a true legend. He is the founder and co-chairman of Bridgewater Associates, the world’s largest hedge fund. Ray Dalio is one of the voices that we listen to in the same way as Warren Buffett.
Like Warren Buffett, Ray Dalio is not a Bitcoin supporter.
At the end of 2017, for example, Ray Dalio called Bitcoin a bubble. He probably ran out of inspiration since he had simply taken over the narrative that prevailed among Bitcoin opponents at that time.
Until recently, Ray Dalio has maintained his anti-Bitcoin stance:
“I’m not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.”
The only point of agreement I can have with Ray Dalio following this statement is that I am not a fan of Altcoins either. As far as Bitcoin is concerned, I obviously think that the author of the book “Principles: Life and Work” is totally wrong.
Ray Dalio sees three problems that will limit the potential of Bitcoin in the future
In an interview with Yahoo Finance last week, Ray Dalio highlighted three issues that he believes will limit the potential of Bitcoin and cryptocurrencies in the future:
- Lack of shops or businesses that will accept Bitcoin and cryptocurrencies as a means of payment. Ray Dalio says: “I today can’t take my Bitcoin yet and buy things easily with it”.
- The volatility of the price of Bitcoin and cryptocurrencies is too great according to him: “That volatility also hurts Bitcoin’s use transactionally because vendors won’t know how much they’re getting”.
- If Bitcoin or other cryptocurrencies become “material”, Ray Dalio predicts that governments will eventually ban them: “They’ll use whatever teeth they have to enforce that”.
I’ll quickly go back to the first two points that Ray Dalio sees as problems.
Bitcoin is already a phenomenal success as a store of value
Currently, Bitcoin’s biggest value proposition is to allow you to protect your wealth over time in a way that is resistant to censorship. Bitcoin is already a success by being the best store of value available to the greatest number of people in the face of the great monetary inflation that we are experiencing.
This corresponds to Phase 1 of the mass adoption of Bitcoin by the general public.
There is no need to be alarmed about the fact that Bitcoin is not a means of payment for everyday life. Gold has a market cap of $9 trillion, and yet you don’t use it to buy your coffee every morning.
Bitcoin can be a success without completing Phase 2 of its mass adoption by the general public. Nevertheless, Ray Dalio should look beyond the United States. He would then see that Bitcoin is already being used as a means of payment for everyday life in emerging countries or under authoritarian regimes.
Bitcoin price volatility is a feature, not a bug
Bitcoin’s volatility is a feature, not a bug, contrary to what Ray Dalio seems to believe. This volatility can become your greatest ally if you know how to take advantage of it. The best way to do this is to become a Bitcoin HODLer.
Again, for Bitcoin’s greatest current value proposition, this volatility is not a problem.
Once Bitcoin has become a mass-adopted store of value for the general public, its price will stabilize, and the volatility that Ray Dalio talks about will no longer be an issue for Phase 2 of Bitcoin mass adoption.
This brings me to the third point that Ray Dalio says is problematic.
Ray Dalio thinks governments will ban Bitcoin
If Bitcoin becomes too successful, governments may be tempted to ban it using any means at their disposal. This is an interesting point because it is something we hear frequently.
First of all, Ray Dalio must understand that Bitcoin is a decentralized network. Bitcoin is Internet-based primarily to function. Therefore, governments should agree to shut down the Internet worldwide.
The governments of the G20 member countries are already unable to agree on a GAFA tax. To think that they could agree on such a concerted action seems even more illusory to me. Nevertheless, let’s assume that they do.
Without a working global Internet network, the monetary and financial system would come to a complete standstill. There would be panic all over the world. It is therefore something inconceivable.
So the solution would be to cut off Internet access at each of the nodes of the Bitcoin network. Not an easy thing to do. The problem is that this scenario has already been anticipated and there are solutions to make a node work via a satellite connection.
Nothing Can Stop Bitcoin, Not Even a Generalized Shutdown of the Internet at a Global Level
Developers prepare the Bitcoin network to resist all types of attacks.
So even without the Internet, Bitcoin could theoretically continue to work.
Governments would have more to lose by attempting to ban Bitcoin
The other point that is interesting here is to remember that governments around the world have never managed to totally eradicate drugs, weapons, gold, or alcohol in the past centuries. Why would they be more likely to do so with Bitcoin?
Bitcoin was created to separate money from the state. Bitcoin aims to restore power to the people over money. If governments were to attack Bitcoin jointly, they would de facto legitimize the existence of Bitcoin. Bitcoin would be seen as something liberating.
Such action would eventually benefit Bitcoin and its adoption.
If one country were to ban Bitcoin completely, it would take the risk that another country would choose to take advantage of Bitcoin to benefit from it. That country would see a significant inflow of capital, while the country that banned Bitcoin would see an outflow of capital that would make it regret its decision.
Bitcoin is here to stay, and countries will seek to take advantage of it
The best thing for countries to do is to realize that Bitcoin is here to stay and deal with it. This implies defining regulations that will tax profits, for example. The governments will be happy about this because it will bring in new tax revenues.
This is the path that seems to be taking shape in many countries.
Following the election of Joe Biden, the appointment of Gary Gensler to work with his team and advise them on Wall Street seems to indicate that a more favorable regulation for Bitcoin could be defined eventually. Indeed, Gary Gensler is a strong supporter of Bitcoin.
Four Major Things That Should Boost the Bitcoin Price During Joe Biden’s Presidency First Months
The next few months promise to be very exciting for Bitcoin.
Seeing him working with the team of newly elected President Joe Biden is a positive signal. We will have to see if this becomes a reality in the months and years to come.
A living legend of investment along with Warren Buffett, Ray Dalio is also an opponent of Bitcoin. Where Warren Buffett is constantly content with a simple “Bitcoin is a rat poison squared”, Ray Dalio goes further by expressing arguments that show that he has taken the trouble to think a little more about it than Warren Buffett.
Unfortunately for him, Ray Dalio is totally wrong in his conclusions about the issues he raises. Bitcoin is already a tremendous success as a store of value and this will continue for years to come.
As more and more famous Wall Street investors end up endorsing Bitcoin, Ray Dalio is still lagging in terms of awareness of the incredible future that awaits Bitcoin.
While a ban on Bitcoin by governments has almost no chance of working in practice, I think we will move in the opposite direction for Bitcoin with the upcoming definition of a clearer, and why not, a more favorable regulatory framework by governments.
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