![[초점] How to invest in something new like Bitcoin (ft. Ray Dalio)](https://www.blockmedia.co.kr/wp-content/uploads/2021/02/브릿지워터표지.jpg "[초점] How to invest in something new like Bitcoin (ft. Ray Dalio)")
This is the conclusion of the legendary hedge fund manager Ray Dalio, who leads Bridgewater Associates.
The bitcoin report in letter format was posted on the Bridgewater website on January 28th. With the title of’My Thoughts on Bitcoin’.
The foreword was written by Dalio. A long article of 25 pages follows. Wall Street investment banks such as JPMorgan published similar reports. Blackrock, the world’s largest asset manager, has also posted a document describing bitcoin futures to the Securities and Exchange Commission (SEC).
Bridgewater’s document is perhaps the most important of these. It even mentions how large institutional investors view bitcoin, and if they invest, they will do this.Because I did.
The bottom line is this.
First, you need to find a repository of new wealth.
Second, Bitcoin is a too small market for institutional investors.
Third, if I’m like me (Ray Dalio himself), I will go in with the intention of flying 80%.
Invest 1 million won. Even if you only have 200,000 won left, if it’s okay, you’re investing. I don’t directly mention how much I can earn. I set up a family and calculate. There is also a number of 85,000 dollars.
Here are some important excerpts. At the very end, I also thought about how Ray Dalio wrote this report.
# Will Bitcoin become digital gold
With the real interest rate being negative, a new repository of wealth is needed. Traditionally, gold has played this role. Gold does not give yield. Bonds pay interest even when they’re still, stocks pay dividends, gold doesn’t.
However, if other assets are destroyed, it makes sense as a repository of wealth. When thirst grows within or between nations, gold also has the advantage of not being tied to any one nation (unlike currency).
If you accept bitcoin as’digital gold’, you can think of bitcoin as a concept similar to gold.
The supply of gold is constant at 2%. In fact, most bitcoins have been mined and the supply is set at 21 million.
90% of the 21 million bitcoin issuances have already been mined. As the mining rate keeps falling, the mining limit is getting closer and closer.
If supply is set this way, demand determines price.
# Volatility is too high
If you compare the turnover of gold and bitcoin, you can see how much the two assets differ. Gold’s turnover rate is significantly lower than that of Bitcoin.
The blue line is the BTC turnover rate. Bitcoin trading turnover exploded due to the increase in high frequency transactions and the lack of uniform trading volume standards.
Bitcoin is also highly volatile compared to stocks and bonds.
The light gray line in the left chart shows Bitcoin volatility. The volatility is 20 times higher than that of stocks, bonds and gold. If investors with different investment purposes participate in the market and liquidity increases, volatility will decrease in the future.
# Very high regulatory uncertainty
There are two expected paths. Regulatory uncertainty is expected to develop over the years.
First, it suppresses the use of bitcoin and cryptocurrency. It is because of the fear that it will erode traditional fiat. Block the development of this asset in its present form. or,
Second, it creates a regulatory environment that can generate greater trust as an asset in the long run. In this process, volatility increases.
A prime example is the strong cryptocurrency crackdown policy implemented by the Chinese government since 2017.
Our biggest concern is the central bank digital currency. If this spreads and becomes formalized as a wealth-saving digital repository, the government will not be willing to compete with non-governmental currencies like Bitcoin.
Bitcoin’s success is Bitcoin’s biggest threat.
# What if funds move from gold to bitcoin?
We put gold and bitcoin as one investment pool, and estimated the price fluctuations when funds move from gold to bitcoin.
We assumed the sum of the gold and bitcoin market caps at $3.2 trillion. BTC market cap is $600 billion.
For every 10 percentage point transfer of funds from gold to Bitcoin, the price of Bitcoin rose 50 percentage points. If the proportions of gold and bitcoin are equal, the price of bitcoin is at least $85,000.
This estimate is a conservative calculation that does not take into account liquidity or price reflection effects. In fact, a shift of this amount of money will cause a supply squeeze and the bitcoin price will rise even higher.
Bridgewater, Gold → BTC 10%P move, BTC 50%P↑… “$50,000 for 30% of the share”
Bridgewater, Gold → BTC 10%P move, BTC 50%P↑… “$50,000 for 30% of the share”
# Bitcoin market too small
The Bitcoin market is a small market compared to stocks, bonds, gold, silver, and iron. When bitcoin is set to 1, the US stock market is 130.4 and the gold market is 11.4.
If bitcoin is set to 1, the stock market is about 130.4. Gold is around 11.4. It is a small market for large institutional investors.
The daily trading volume is also extremely small compared to gold.
From the perspective of large institutional investors. Basic infrastructure such as a thorough consignment system, safety measures, insurance devices, etc., which are necessary for Bitcoin investment, is extremely lacking.
It is said that the price of Bitcoin (blue) has risen a lot, but there is a big difference in the daily trading volume compared to gold (red).
# Ray Dalio’s heart
Ray Dalio has been managing hedge funds since 1975. Bridgewater, which he created, has grown into the best hedge fund for 50 years. It was also named Fortune’s 5th Most Important American Company.
Bridgewater’s representative investment strategy is Global Macro Investment. It means short selling individual stocks such as Gamestop, not like this, but looking at macroeconomic movements and investing in bold lines.
Ray Dalio’s New Year’s talk with the Washington Post on January 30 What will happen if the US loosens so many dollars, This worries comes out. Find a store of new wealthIs an extension of the story.
In the preface to the Bitcoin report, he wrote that other cryptocurrencies and digital currencies other than Bitcoin could also serve as a store of wealth.
“There is no guarantee that Bitcoin will be successful. Anyway, look for a new repository. So I did a bitcoin study, and as a result, I thought it was a long-term option.”
I’m looking for something. We let our customers know that big changes are coming and we are preparing.
What change is he worried about?
# System risk
In an interview with the Washington Post, I also talk about GameStop. Since the interviewer asks if it is a rebellion against the market, he says:
“I started investing at that age too. I was rebellious, and I wanted to do something my own way to invest and break the market (wiggling fists). What I worry about is overall anger, hatred, and desire to hurt each other. The system is at risk.”
Ray Dalio (right) said the phenomena surrounding the game stop should be viewed in terms of system risk. (Capture of the Washington Post live video)
The 2008 financial crisis and the 2020 corona-triggered crisis. Twelve years have passed, but the problem of wealth inequality is only building up.
Bitcoin is one of many alternatives. The contents of the previous report may be familiar. High volatility and small market size can be solved by popularization.
The problem is a regulatory issue. Are regulatory parties ready to detect system risks and take countermeasures in advance? I do not know. Even though these complaints exploded on bulletin boards like Wall Street Bethes.
There were many important words from Ray Dalio’s report to the preface, text, and interview. This is especially memorable.
“The new way, the new way the old, the old always replaces. This is the principle of evolution.”
(In fact I assume that better ones will come along and displace this one because that is the way the evolution of everything works—ie, new ways of doing things and new things always have and always will replace old ways of doing things and old things .)