Key takeaways:
- Ray Dalio sees an opportunity for gold and bitcoin: he believes that growing debt, weakening demand for bonds and monetary expansion may weaken fiat currencies.
- The US debt may reach up to USD 60 trillion within a decade.
- In the background, the US Treasury announced that it will purchase US bonds more intensively.
Ray Dalio: only gold and bitcoin!
Why cryptocurrency? The bitcoin protocol has a maximum number of 21 million “coins”, and the pace of their issuance is predetermined. In theory, this means that, unlike state currencies, bitcoin cannot be printed at will in response to growing budget needs.
This does not mean, however, that Dalio considers bitcoin to be equivalent to gold. In May, he pointed out that BTC’s correlation with technology stocks may limit its role as a safe haven. During a sharp sell-off, investors may sell bitcoin along with other risky assets to cover losses in the rest of their portfolio.
US debt may increase to USD 60 trillion
The problem Dalio warns about is increasingly visible in U.S. federal finance data. The Congressional Budget Office projects that the U.S. deficit will be approximately $1.9 trillion in fiscal year 2026. At the same time, public debt is expected to continue to grow in the coming years, reaching approximately 120 percent. GDP in 2036.
The scale of debt is already record high. According to data from the Treasury Department, total U.S. public debt has exceeded $40 trillion, reaching approximately $40.05 trillion on August 18.
Dalio believes this is just the beginning of the problem. According to him, after taking into account the recently adopted budget changes, independent analysts expect that in a decade the US debt may reach up to USD 60 trillion.
The rising costs of debt servicing are one of the most important pieces of the puzzle. The greater the debt, the greater the share of state revenues that must be used to pay interest. If high deficits persist at the same time, the government must issue more bonds to finance current spending.
Dalio warns that absent a change in current fiscal policy, a full-blown debt crisis could occur within about three years, with a margin of two years either way.
The US increases bond purchases
Investor concern was further fueled by the recent decision of the US Treasury regarding the bond purchase program. On August 19, the ministry increased the maximum value of purchases of some securities with maturities ranging from 10 to 30 years from USD 2 billion to at least USD 4 billion per operation.
This decision was received as another signal regarding the situation on the American debt market. However, this is not quantitative easing by the Federal Reserve. The Treasury Department does not create new money this way.
In such an environment, however, bitcoin can be seen as the digital equivalent of gold. Its supporters point to limited supply, the possibility of self-storage and the ease of transferring funds without the intermediation of the state or central bank.
