RAY DALIO: Bitcoin is a speculative bubble

RAY DALIO: Bitcoin is a speculative bubble

By Jacqui Frank and Kara Chin / This article was originally posted on Business Insider. For more follow the link below.

Business Insider CEO Henry Blodget sat down with Ray Dalio, the chairman and co-CIO of Bridgewater Associates and author of the newly released book “Principles: Life and Work.”

Blodget asks Dalio about Jamie Dimon’s recent comments referring to bitcoin as a fraud.  Dalio says bitcoin is not an effective medium of exchange, calls the currency a speculative bubble, and says even the privacy aspect will be stress tested.

Following is a transcript of the video:

BLODGET: I got it. Let me ask you about Bitcoin.

DALIO: Okay.

BLODGET: Bitcoin, people say the same thing. It’s a store of value. You gotta diversify. The dollar’s not safe. It’s been going up and up and up. Yet recently it crashed. Jamie Dimon came out and said, it’s complete fraud. He’d fire anybody at JPMorgan who invested in it cause he wouldn’t want people that stupid working for him. What do you think?

DALIO: There are two purposes of a currency. Is it a medium of exchange? And is it a storehold of wealth? Those are the basic ingredients. Bitcoin is not an effective medium of exchange by and large. I have a Bitcoin. I want to go buy things. It’s not easy to buy things with the Bitcoin, and in terms of a store of wealth … gold more reflects the opposite of what money is doing, right? And so you look at it, it’s a store of wealth.

Bitcoin is a speculative bubble, right? Its price is like a greater fool theory. If you say, what is its intrinsic value? If Bitcoin was made to a more effective medium of exchange, and also operated in terms of a store of wealth, not of the reflection of that volatility, it would be a viable instrument. It is, to me, a vehicle for speculation that’s attracting people in, and it has all the classic ingredients of a bubble. People are leveraging themselves up. It doesn’t have that same intrinsic value. Even the privacy value, okay, is suspicious.

In other words, it has a purpose to some extent. If you’re living in a country, and you don’t know your currency, whether it’s gonna be good or not, and you might try to hold that. But that thing you’re holding is running around like crazy for reasons that you don’t understand, so it’s not gonna be an effective store of wealth, and the privacy will be stress-tested.

In other words, governments are examining who is operating in their own clever ways, and so you can’t even assume it’s gonna be a privacy vehicle. So I don’t see the effectiveness of Bitcoin. I could see cyber currencies and so on, crypto-currencies, but this is not what we’re having. You know, it’s a possibility that I think has been captured as a speculative vehicle that’s in the middle of a bubble.

Get the latest Bitcoin price here.

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