Why This Legendary Investor Owns Cryptocurrency But Prefers Gold

Even though he's invested in crypto, Ray Dalio, legendary investor and founder of hedge fund Bridgewater Associates, says he prefers gold.

"I have a small percentage of my portfolio in crypto," Dalio told Investopedia's editor-in-chief Caleb Silver in a recent interview, adding that his exposure is driven by the need to think about alternative forms of money. "I prefer gold."

Gold and bitcoin (BTCUSD) have reached multiple all-time highs this year, though the digital currency has gained about 125% so far in 2024 while the precious metal is up 30%. The digital currency has soared in particular since the presidential election as investors expect the incoming Trump White House and Congress to adopt measures that support the crypto industry.

So, why does Dalio lean more towards the precious metal?

What Worries Dalio About Crypto

"So the reason I'm concerned about crypto is, first of all, privacy, the government knows exactly what you've got, where it is, and it's also an effective way of taxing it," said Dalio.

In its initial days, one of cryptocurrency's marketing points was user anonymity. However, as rules have evolved, that's not entirely true for crypto as an investment or if you use it for a transaction, and there are tax consequences.

Dalio also questions the notion that bitcoin, as some suggest, can be a hedge against rising inflation.

"The reliability of crypto in terms of, let's say, saying, 'Does it correlate with inflation? Does it correlate with those things?' No, it doesn't really, not well. It's still largely a speculative vehicle," he said.

Dalio also said that crypto, unlike gold, is unlikely to be a major reserve currency anytime soon.

"It's not likely to be a reserve for a currency, it won't work," Dalio said. "Gold is still is the third largest reserve currency: the U.S. dollar, the euro, gold, and then Japanese yen. So I prefer gold."

Dalio said that while there's "merit to it," bitcoin "still has to prove itself."