Bridgewater: the biggest risk of bitcoin comes from its success

Bitcoin, as the first invented network virtual currency circulating in the world, has been paid much attention since its emergence. On February 9, 2021, stimulated by Tesla Howe’s $1.5 billion investment in bitcoin and its acceptance of bitcoin to pay for cars, bitcoin broke through the $46000 mark, which seemed to ignite investors’ enthusiasm for bitcoin once again. The seemingly soaring market has made many people ignore that the bitcoin market is changeable, and its price is highly volatile and uncertain. Unlike the traditional currency, bitcoin relies entirely on the Internet to create and trade. Its biggest feature is decentralization and global circulation. In view of its particularity, people have never stopped discussing the development status and prospects of the special currency. Recently, ray Dario, founder of Bridgewater, the world’s largest hedge fund company, published an article on his views on bitcoin. In this paper, he regards bitcoin as an alternative investment possibility, but the conclusion is still uncertain about the future direction of bitcoin. He acknowledged that bitcoin may indeed become a long-standing and valuable asset, and affirmed its technological advantages. However, he also pointed out the risks associated with bitcoin and its similar digital currency: the supply of bitcoin is limited, but the supply of all digital currencies is infinite, and there is a great probability that bitcoin will be replaced by new digital currency; bit As a network virtual currency, currency is not strong enough to resist hackers’ intrusion; the more successful bitcoin is in conflict with traditional currency and credit system, the more likely the government will restrict it. We may have a better understanding of the special currency through the views expressed by him. The following is the original text of RI Dalio published in LinkedIn on January 28, 2021: The purpose of my writing this article is to illustrate my real view on tecoin. I hope you’ll pay attention to what I’m saying in this article, because it’s more authentic than what I’ve said about bitcoin in the news media. I find that most of the people who want to promote bitcoin and the conservatives who oppose bitcoin will interpret my views from a perspective that is more beneficial to them, so as to gain more support. But, like most of the things I’ve commented on, in reality, bitcoin has its own advantages and disadvantages. I can only express my understanding of bitcoin as accurately as possible. Again, since I’m not an expert on bitcoin and cryptocurrency, I don’t think you can trust me completely, which makes me think I shouldn’t publish this article. I know how much time and energy it takes for a person to develop a valuable point of view in the market, so I won’t be stubborn. Nevertheless, I have been asked to make a seemingly professional assessment of tecoin. Considering that it is better for me to state my own views than to be distorted by the media, I have published this article to remind you not to rely too much on my unilateral views. My only requirement for readers is to read my words here, not to pay attention to the media coverage of me. Bitcoin leads the development of new money. Bitcoin is a new currency invented through a system that has been programmed into a computer. I think it is a wonderful invention. This new type of currency has been in operation for about 10 years, and it has gained more and more attention as a currency and a way to store wealth. This is indeed a great achievement. Just like the credit based monetary system, bitcoin is like alchemy, that is, it can create wealth with little or no cost. Around 1350, beginning with the Medici family, many bankers accumulated a lot of wealth through credit. Similarly, bitcoin has made its inventors and those who joined the system very rich, and has the potential to enrich more people and subvert the existing monetary system. Those who invented bitcoin and supported the idea of making this new currency a reality have excellently maintained that dream and gradually transformed bitcoin and its rival currencies into an alternative asset similar to gold. At present, there are not many alternative assets like gold, but the demand for it is increasing in the world economy, because all debt and money creation are generated and will continue to exist in the future. Due to the development of the world economy, people’s demand for money, wealth assets with limited supply and assets that can be privately held are growing. However, there are not many gold like wealth assets that can be held by private individuals, and their market is relatively small. This provides opportunities for bitcoin and its competitors, and maybe they can meet these growth needs in the future. In my opinion, in the past, people thought that bitcoin was a highly speculative idea, which may not be realized in a short time. Now, bitcoin has gradually made people believe that it will exist for a long time in the future and become a kind of asset with certain value. For me, the biggest question is what the actual use of bitcoin is and how much it will be needed in the future. Since the supply is known, its demand must be estimated to estimate its asset price. Will bitcoin be replaced by more advanced digital currency? I should clarify my view on the supply of bitcoin. Although the supply of bitcoin is limited, the supply of digital currency is unlimited, because new digital currency has emerged and will continue to emerge and form competition. Therefore, the supply of bitcoin like assets and the competition between currencies affect the prices of bitcoin and other cryptocurrencies. In fact, I think there will be more advanced digital currencies that will replace bitcoin, because this is the way everything in the world evolves – that is, new ways and new things always exist and will eventually replace the old ones. Because the operation mode of bitcoin is limited, it does not have much room for development, so I think people will invent a more advanced new currency, which will eventually replace the existing bitcoin. I think that’s one of the risks of bitcoin. Because of this, “bitcoin supply is limited” is not as true as it seems. For example, if BlackBerry had been in limited supply in the market, it would not have been worth much because it has been replaced by more advanced and intelligent mobile phone products. I still don’t know why some people think it’s not a risk, but I still welcome them to prove to me that it’s not my unnecessary worry. The risk of network security can not be ignored. At the same time, I admire bitcoin for withstanding the test of 10 years, not only in terms of time dimension, but also because of its excellent technology, and the network system has not been invaded by hackers. Nevertheless, in this era when cyber crime is much more powerful than Cyber Defense, cyber risk is still a risk that I think cannot be ignored for a person with digital / encrypted assets. When the U.S. Department of defense no longer has the ability to protect its systems from hackers, people have to admit that digital assets can indeed be illegally hacked. Property security is one of the advantages of gold assets, but also one of the risks of all financial assets. In fact, I think it’s very likely that one day we’ll see that a financial system made up of numbers is more vulnerable to sabotage or cyber extortion than is currently recognized. In addition, these situations are happening at an increasing speed and may threaten the value of traditional financial assets. I’ve pointed out to you what I think is the risk, but the choice is in your own hands. Although I know bitcoin can be stored offline through a “cold wallet,” it’s very difficult, and in fact, not many people actually do. On the whole, I don’t think bitcoin’s resistance to cyber risks has yet to satisfy me with the digitization and interconnection of bitcoin. I look forward to correcting my above views. Privacy is hard to guarantee, and the problems that the government or its participation in regulating and controlling extend from the digitization of bitcoin (Note: Here “bitcoin” refers to bitcoin and other cryptocurrencies competing with it), as well as the degree of privacy of bitcoin and the tolerance and supervision of the government for its existence. With regard to privacy, bitcoin is unlikely to be as private as some might have guessed, after all, the bitcoin system is a public ledger, and a large number of bitcoin are held in non private ways. If the government, or even hackers, wants to know a person’s bitcoin holdings, then that person’s privacy may not be protected. Moreover, in my opinion, if the government wants to ban bitcoin, most people will no longer be able to use bitcoin, which will lead to a sharp drop in the market demand for bitcoin. It is not impossible for the government to violate the privacy of bitcoin and / or prohibit the use of bitcoin and its competitors. In my opinion, the more mature bitcoin develops, the more likely it is. Since the establishment of the first central bank (the Bank of Scotland) in 1694, the government has every reasonable reason to want to control the currency and protect its right to own the only currency and credit in its territory. When I stand in the shoes of government officials, see what they do and hear what they say, I find it hard to believe that under the existing monetary and credit system, the government will allow bitcoin or gold to be a significantly better option. So I have reason to suspect that bitcoin’s biggest risk is its success. If bitcoin is successful, the government will implement measures to stifle its development, and indeed the government does have the ability to do so. Creating or destroying wealth? In terms of supply and demand, the supply of bitcoin is known, but the long-term demand over a relatively long period of time (because it is a long-term asset) is difficult to predict, mainly for the reasons I mentioned above. For example, since I see bitcoin as an alternative asset similar to gold, I asked Rebecca Patterson of the bridge water fund and other colleagues to calculate the value of private holdings of gold, and then convert different proportions of gold assets into bitcoin to distribute asset allocation. For example, suppose that 10% or 20% or 30% or 40% or 50% of gold held by the private sector is converted to bitcoin, that 10% or 20% of the people who created bitcoin want to transfer some of their digital assets to invest in gold or stocks, or that the government wants to ban the use of bitcoin and assume that If that happens, what will happen? The results reflect the highly uncertain outlook for bitcoin. That’s why I think bitcoin is like a long-term option in the highly unknown future. I can invest some money, and I won’t mind losing about 80%. That’s what I think of TEK as a non professional. I always want to be corrected and learn more. On the other hand, my colleagues and I at the bridge water fund have always been working on alternatives to wealth storage, so please believe in our efforts. Reference: 1. Https://www.linkedin.com/pulse/what-i-really-think-bitcoin-ray-dalio/2.https://www.bridgewater.com/research-and-insights/ray-dalio-what-i-think-of-bitcoin Editing | Daisy page | Tian Xiaona

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