American billionaire and hedge fund manager Ray Dalio recommends allocating 15% of a portfolio to Bitcoin or gold to optimize the "optimal risk-return ratio" amidst the US's severe debt problems and currency devaluation.
"If you're optimizing your portfolio for the best risk-return ratio, you should have about 15% in gold or Bitcoin," the founder of hedge fund firm Bridgewater Associates said during an appearance on the Master Investor podcast on Sunday.
However, Dalio stated that he "holds some Bitcoin, but not much" and still "strongly prefers gold over Bitcoin."
But the exact allocation between Bitcoin (BTC) and gold is "up to you," Dalio said. His 15% recommendation represents a significant increase from the 1% to 2% Bitcoin allocation recommended in January 2022.
Dalio's comments come amid the US debt crisis, with Treasury data showing that the national debt has swelled to $36.7 trillion.
"The problem is currency debasement," Dalio said, noting that the US government may need to issue $12 trillion worth of Treasury bonds next year to repay its growing debt.
Latest US Treasury Report Reinforces Dalio's View
The US Treasury released a report on Monday projecting $1 trillion in new borrowing in the third quarter—$453 billion more than previously estimated—due to weak cash flow and declining reserves.
The Treasury also projected $590 billion in borrowing in the fourth quarter, exacerbating the US government's reliance on debt to finance budget spending and heightening concerns about its future fiscal path.
Dalio noted that other Western countries, including the UK, face the same "debt cycle" problem, and their currencies will continue to underperform against hard currencies like Bitcoin and gold—which he described as "effective diversifiers."
Dalio Remains Skeptical of Bitcoin's Reserve Currency Status
Despite advocating for Bitcoin as a portfolio diversifier, Dalio remains skeptical of its potential as a reserve currency. He expressed skepticism about any central bank adopting cryptocurrencies for such a role, citing their lack of privacy and the transparent nature of transactions.
"Governments can see who is conducting what transactions," he said, suggesting that any potential vulnerabilities in Bitcoin's code could undermine its effectiveness as an alternative currency.
