The smart rabbit principle: Why Ray Dalio chooses gold over bitcoin for protection

Bridgewater Associates founder Ray Dalio called gold a historically proven form of "real money" - the only one that doesn't carry the risk of someone else's default. With military escalation juxtaposed with the critical U.S. debt load, investors see the precious metal as the ultimate tool for protection.

In today's world, where danger can strike in any country, the most valuable investment is the ability to get away to safety, says Ray Dalio.

"Over the last 200 years, about 85% of countries have had circumstances so dire that huge numbers of people have had to flee - because of war, persecution, famine or state collapse," Ray Dalio said on the All-In podcast. The founder of Bridgewater Associates believes the old adage "a smart rabbit has three holes" is a crucial history lesson that is often forgotten by those who have not personally experienced chaos.

According to Dalio, gold is a non-alternative instrument of protection. "Gold is the only asset of its kind. It has been a historical asset for centuries for a number of reasons: it's easy to transport, it can't be printed in huge quantities. Most assets today are just a promise by someone to give you purchasing power," the investor emphasizes. He notes that it is no accident that central banks have turned the metal into the second largest reserve currency: gold is recognized by all parties to a conflict and is the ultimate medium of exchange.

Bitcoin, according to Dalio, cannot yet compete with gold as a safe haven. The key barrier is the lack of privacy: the transparency of the blockchain allows any transactions to be tracked and indirectly controlled, making the asset vulnerable to government monitoring. In addition, the high correlation with the technology sector removes bitcoin's independence. "If an investor gets 'pinched' in one asset, they sell everything else, including cryptocurrency, to free up liquidity," Dalio explains. The bitcoin market remains too tiny and controlled, he says, while gold is unique in its ability to preserve capital outside of digital and banking systems.

Immediately after the outbreak of hostilities in the Middle East, the cost of gold soared above $5400, but then went down amid rising inflation risks. The metal may end the week down by more than 3%. Bitcoin behaved as a typical risky asset: immediately after the escalation of the conflict, its value fell below $64,000, and the market capitalization decreased by tens of billions. By the end of the week, bitcoin recovered its losses and is trading above $70,000.

This article was AI-translated and verified by a human editor