An important difference between gold and a virtual currency like Bitcoin is that the precious metal cannot be traced. In a world with more uncertainty and financial repression, this can actually be an advantage. That's what asset manager and investment guru Ray Dalio of Bridgewater Associates says in an interview with Lex Fridman. A gold coin can be handed over anonymously, while Bitcoin can be traced by governments.

In the interview, Dalio says that he has changed his opinion of Bitcoin, because it has proven itself as an alternative form of wealth and possibly even as an alternative means of payment. Whether it will replace gold, however, he is not so sure. The precious metal has a track record of thousands of years and is also on the balance sheets of central banks. In that sense, according to the asset manager, it is not replaceable. He had this to say about it:

"The evolution of Bitcoin over the past few years has changed my opinion. It has proven itself. Ten or twelve years ago, it was programmed and released. It hasn't been hacked since then and has now reached a stage where its value is no longer in question. At the same time, it is an asset that is also an alternative form of money. 

I think we are entering an era where there will be competition between types of money. Due to the printing of fiat money and its depreciation, there will be competition. Bitcoin is also a competitor, but there are many types of money, not just cryptocurrency. There will be digital central bank money, but also other types of money. Also, NFTs can become a form of money, you can own it and prefer it to Bitcoin.

It's the same with cryptocurrencies as with all other new things, some will continue to exist and others will perish. I really believe that we are in a situation where there is alternative money. And money has two purposes, it is a medium of exchange and a form of store of value. And it works even better when it's recognized in other countries. Gold is one of those instruments."

Gold vs Bitcoin

According to Dalio, Bitcoin is a kind of alternative to gold, but not a full-fledged alternative. The fact that one can trade the cryptocurrency via the internet seems to be an advantage, but there is also a less favorable side to it. The blockchain records all transactions and credits of the network of Bitcoin users. A gold coin, on the other hand, can be traded without leaving a data trail.

"So I see Bitcoin as an alternative to gold, but there are more alternatives to gold. Still, gold remains my favorite, because it has certain qualities. Gold, for example, cannot be traced. Bitcoin allows you to trace who owns it and where it goes. Governments can track it. A gold coin is not connected to the internet. The fact that it's not connected to anything has its advantages, especially in a world where those kinds of connections are riskier. Moreover, gold has been universally accepted as a form of money for thousands of years.

The precious metal is also the third most important reserve for central banks. I don't expect Bitcoin to be used for that purpose. So, for various reasons, I prefer gold. Cryptocurrencies are only a small part of my portfolio."

This contribution comes from Geotrendlines