Billionaire hedge-fund manager Ray Dalio sounded a bullish tone for cryptographic assets even as he warned that the Federal Reserve was fostering a bubble in markets fueled by its loose monetary policy.
Responding to a question about his perception of the nascent digital-asset market on Tuesday at The Wall Street Journal’s “The Future of Everything Festival,” Dalio described crypto as “exciting and unknown.”
“Its own biggest risk is its success,” he said. “No government wants to have an alternative currency.”
Dalio, founder of the world’s largest hedge fund firm, Bridgewater Associates, said that he’s “very bullish,” about crypto as a digital-clearing mechanism, perhaps, referring to decentralized finance, or DeFi.
DeFi are applications and services that can facilitate borrowing, lending and trading crypto assets without an intermediary. It is seen as a possible threat to traditional financial markets, or as an application that could be more readily used to enhance buying, selling and lending on Wall Street.
A research report published on the Federal Reserve Bank of St. Louis’s website recently said that DeFi has some issues with security but if addressed could shake up the financial industry.
As a storehold of value, Dalio said crypto is intriguing and “probably could be important for us.”
The hedge funder’s comments come as bitcoin
the world’s No. 1 most-valued crypto has been trading around $55,000 and the second-most popular asset Ether
running on the Ethereum blochain, has been trading at a milestone above $4,000.
However fervor around more speculative digital assets like dogecoin have raised questions about whether the crypto sector is in the midst of a bubble.
Bitcoin prices are up 90% so far in 2021, those for Ether have risen 435% year to date. More traditional assets meanwhile have seen more subdued moves. Gold futures
are down 3.5% so far this year, the Dow Jones Industrial Average
was up nearly 12% the S&P 500 index
was up by about 10% in the year to date and the Nasdaq Composite Index
was up 2.8%, despite a big decline for all three equity benchmarks Tuesday.
Dalio told the WSJ that the markets were “having bubbles” and that it was one “where there is so much money…and [you] don’t tighten,” monetary policy, referring to the Fed’s easy-money stance, which the central bank as had in place since the start of the COVID pandemic.
Dalio, a prominent figure in the world of finance, has a networth of $20.3 billion, according to Forbes.